Can You Sue a Brokerage Firm for Investment Losses? - Law Offices of Robert Wayne Pearce (2024)

Aug 22, 2022 | By Robert Pearce | Read Time: 4 minutes | Investor Losses |

If you have experienced significant investment losses, you may be wondering if you cansue your brokerage firm.

Can You Sue a Brokerage Firm?

Yes, you can sue a brokerage firm to help recover any investment losses that you have suffered due to a broker’s negligence or fraud. Lawsuits are typically filed against brokerage firms rather than individual brokers because the firm is vicariously (automatically) liable for the actions of all their employees.

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In addition, brokerage firms are directly responsible for supervising its employees and ensuring that they are adhering to industry regulations and can be held liable for their supervisory failures.

FINRA rules require a brokerage firm to establish policies and procedures that monitor brokers’ activities in order to avoid investor losses and investment fraud. As such, if the brokerage firm hasfailed to superviseits employees properly and this has led to your investment losses, you may have a claim against the firm.

When Can a Brokerage Firm be Held Liable for Investment Losses?

Despite having issues with an individual broker, many investors are surprised to learn that lawsuits against an individual are actually quite rare.The vast majority of lawsuitsthat are filed in connection with investment losses are brought against the brokerage firm that employed the broker.

A brokerage firm is required to properly supervise its employees and to ensure that they are adhering toFINRA rules and regulations. If the firm fails to do so and this results in investors suffering losses, the firm can be held liable.

It’s unfortunately common for independent brokerage firms to hire under-qualified brokers with little to no experience in the industry. These brokers are often given very little training and are left to their own devices when it comes to handling clients’ investments. As a result, these inexperienced brokers can make serious mistakes that cost investors a lot of money.

Due to the fact that brokerage firms are required to properly supervise their employees, the liability for investment losses often falls on the brokerage firm that hired the broker rather than the individual broker him or herself.

In addition, underSection 20(a) of the Securities and Exchange Act, a brokerage firm can be held liable for the negligence of its individual brokers and advisors. In essence, the law tends to hold the brokerage firm liable for the misconduct of its employees unless the brokerage firm acted in good faith and did not indirectly cause the misconduct which has resulted in the investors’ losses.

The Law Offices of Robert Wayne Pearce P.A. has over 40 years of experience representing those who have been wronged by a fiduciary and haverecovered over $170 millionin investment losses for our clients. If you believe that you have been the victim of broker or brokerage firm misconduct, we can help.Contact us todayfor a free consultation.

When Does the Liability Fall on the Individual Broker?

There are many circ*mstances where the liability for investment losses may fall on the individual broker. For example, if a broker makes material misstatements or omissions about an investment, the broker can be held liable for any losses that result from those misrepresentations. Additionally, if a broker engages in fraudulent or illegal activity, the broker can be held liable for any losses that occur.

All brokers and financial advisors are required to adhere to a strict code of ethics and owe their clients afiduciary duty. A fiduciary duty is a legal obligation to act in the best interest of the client. If a broker breaches this duty and causes the client to lose money, the broker can be held liable.

There are a wide variety of circ*mstances where a broker may breach their fiduciary duty to a client. For a more complete discussion on when the liability for investment losses falls on the individual broker, please see our article on “How to Sue a Financial Advisor or Stockbroker Over Investment Losses.”

Have You Suffered Investment Losses? Take Legal Action Today.

If you have suffered investment losses, you may be able to take legal action against the brokerage firm or individual broker responsible for your losses. The first step is to consult withan experienced securities lawyerto discuss your case and determine what legal options are available to you.

The Law Offices of Robert Wayne Pearce P.A. has over 40 years of experience representing those who have been wronged by a fiduciary and haverecovered over $170 millionin investment losses for our clients. If you believe that you have been the victim of broker or brokerage firm misconduct, we can help.Contact us todayfor a free consultation.

Robert Wayne Pearce

Robert Wayne Pearce of The Law Offices of Robert Wayne Pearce, P.A. has been a trial attorney for more than 40 years and has helped recover over $170 million dollars for his clients. During that time, he developed a well-respected and highly accomplished legal career representing investors and brokers in disputes with one another and the government and industry regulators. To speak with Attorney Pearce, call (800) 732-2889 or Contact Us online for a FREE INITIAL CONSULTATION with Attorney Pearce about your case.