Do I Have a Securities or Investment Claim?

This is the most common question a potential client asks during an initial interview.  This article is directed to those investors who are wondering if they have a claim but have not yet sought a consultation.  Hopefully, this article will provide some insight into what a securities fraud attorney looks at when reviewing a potential client’s claim.  However, I would stress that all evaluations are individual in nature and while this article is meant to provide generally instructive insight, only a full one-on-one consultation with an attorney can provide a full review of your claim and provide individual guidance.

In my analysis of a potential client’s securities claim I look at two primary factors: 1) the strength of the liability case; and 2) the ability to collect from the defendant.  The answer to these two factors weigh heavily in moving forward with the potential client’s claim.  The strength of the liability of the claim is the initial assessment of how likely a judge or arbitration panel would likely find the defendant liable for misconduct.  The ability to collect factor looks at what potential defendants could be liable for the misconduct the client is alleging and the ability of those defendants to compensate the client’s losses.  In many cases, the second factor will not need to be seriously investigated.

What factors influence the strength of the liability of the case?  This is a hard question to answer because each case is different and liability is premised on different factors given the type of claims being made.  In cases of fraud or misrepresentation the strength of the case often lies in the ability to prove the false statements made to the client.  Written communications, emails, advertisements, and other documents that can be proven false or misleading tend to make stronger cases.  If a securities regulator has also found the defendant’s conduct to be fraudulent or misleading or has disciplined the same or another brokerage firm for similar conduct such evidence helps to strengthen the case.

In case of negligence or mismanagement of the investment account there are a different set of factors that are focused on.  These factors include the investor’s relative experience and knowledge of the securities products together with the client’s investment objectives and risk profile.  These factors tend to operate on a sliding scale where the riskiness of the investments in the account is weighed against investor’s risk profile.  The greater the mismatch between the client’s objectives and the risks of the investments in the account the stronger the liability case against the brokerage firm.

The second factor I review is the ability to collect from the defendant once the liability case is proved.  Without a viable defendant to pursue it is often impossible or extremely difficult to collect on a favorable award.  While many claims are filed against large Wall Street firms, unfortunately some of the worst investment frauds, such as Ponzi schemes, are often the most difficult for the defrauded investor to find a viable source for relief.  Many clients are shocked to learn on initial interviews that brokerage firms and advisors are not required to carry insurance to protect against claims of misconduct.

Finally, if you’re on the fence about contacting an attorney about your potential claim, a free consultation costs nothing and can provide comfort and information.  Many victims of investment fraud fail to come forward because they are either embarrassed of having being taken advantage of or believe that securities regulators are working to return investors’ money.   However, a study of 75 Securities and Exchange Commission (SEC) cases resulting in $4.8 billion in civil fines from 2002 through 2005 revealed that the SEC distributed only about 1% of the proceeds, or $60 million, in only three of those cases to investors.  Further, securities regulators tend to take years to distribute funds in the very few cases that the agency does provide investors with restitution for losses.  In the meantime the statute of limitations can lapse barring the investor from civil relief.  Therefore, counting on regulators to help you recover your losses is often not a realistic strategy.

The attorneys at Gana LLP are experienced in investigating claims of securities misconduct.  Our attorneys can help you detect and uncover suspicious activity in your accounts.  Our consultations are free of charge and the firm is only compensated if you recover.