The arbitration suit claims improper trading strategies with regards to Vistula (OTCBB:VSTL), iCurie, now known as Celsia Technologies, Inc (OTCBB:CSAT) and Xenomicx (OTCBB:XNOM). It also covers other investments which resulted in hefty losses.The suit is seeking compensatory and punitive damages for alleged misconduct on the parts of the stockbrokers.
The case is set to be heard by the National Association of Securities Dealers, Inc (NASD). The claim against Axiom involves failure to supervise, negligence, unsuitability claims, misrepresentation and omissions of fact, and trading activities of low-priced securities, all of which are common claims in stockbroker arbitration cases.
Claims against stockbrokers often fall into specific categories. Those categories are:
- Unauthorized investments/failure to follow instructions:
In some cases a broker will not consult a client before making trades involving nondiscretionary accounts. This is a breach of the broker's fiduciary duty to his client and can be remedied by voiding the unauthorized trades and recovering losses from the broker. In other circumstances the broker will not follow the investor's requests regarding his account (i.e. failing to follow instructions to sell a stock). A broker may also improperly pressure a client to change his instructions for the broker's benefit. This is also grounds for recovering losses.
- Unsuitable recommendations/investments:
This occurs when a broker recommends investments to a client even though they are unsuitable given the client's financial circumstances and investment objectives. It is important to keep in mind that what one person considers a great investment might be a terrible investment to another person. Single people in their 20s should not use the same investment strategies as people who have retired and are living on a fixed income. It is up to the stockbroker to know each of his clients and their situations, in terms of their financial status, ability to handle risk, and investment objectives.
- Misrepresentations and omissions:
Misrepresentation often includes brokers claiming that they know what a stock price will do, that profits are guaranteed, or that they have inside information on a company. In other circumstances the broker will fail to give important information about a company that a client needs to know in order to decide whether or not to invest in that company.
- Churning (excessive trading):
Churning occurs when a broker excessively trades on an account in order to build up the commissions he receives from the account.
- Misappropriation:
Misappropriation occurs when the broker does not report transactions to his employer. Some brokers also commit acts of theft, fraud, forgery, and selling investments that don't actually exist.
- Price manipulation:
Stockbrokers can manipulate prices of securities by falsely promoting an investment using high-pressure sales strategies aimed at making an investment seem more valuable than it actually is. Doing so increases the price of the security which the broker takes advantage of by then selling shares he had purchased previously (at a much lower rate) in order to make a profit.
- Over-concentration:
Having too much of a portfolio in one type of investment, or in only one or two different stocks, greatly increases the risk of loss to the investor. It is a broker's duty to recommend diversification of an account including different investments, industries, and investment classes in order to avoid excessive losses.
It can be difficult to detect if your stockbroker is involved in some form of misconduct. However, if you keep an eye on your statements and make sure that all transactions on your account make sense to you, you can go a long way toward preventing becoming a victim of misconduct. If you believe you are a victim of stockbroker misconduct, seek the advice of an attorney who can let you know whether or not you have a claim against your stockbroker.