D&G Law

Volatile Financial Markets Reveal Improper Broker Recommendations

2022 has been a difficult year for anyone who relies on their investment portfolio, whether for retirement, college savings, or supplemental income. The pandemic, fallout from the war in Ukraine, backed up supply chains, and Federal Reserve policy have combined to create a perfect storm for securities markets. While the volatile markets of 2022 have been felt by most investors, some have paid an even higher price due to “unsuitable” recommendations by their brokers.

“Suitability” refers simply to the requirement under securities laws that brokers only recommend trades to their customers that are suitable for each such customer, given their individual needs and risk tolerances. For example, a speculative, high risk, investment could be a viable option for a young person with many years left before retirement to recoup any losses. But someone in their 60’s nearing retirement cannot afford to risk their portfolio in the same way. The law accordingly requires brokers to tailor their recommendations to their customers’ needs and risk tolerances.

This year many investors have discovered that their brokers were speculating with their money in risky cryptocurrencies or in so-called “meme” stocks, such as AMC and GameStop.  While the market may have been down across the board, investments in these sorts of particularly speculative gambles have cost some investors their entire life savings.

In addition, the broker is duty-bound to fully understand any recommended investments. This year, for example, has seen one of the worst years for bond investments in history. But some investors who thought they had bought garden-variety, conservative bonds were, in actuality, sold complex derivative investments that have compounded their losses.

If you have lost inordinate amounts in your investment accounts, our attorneys will be happy to review your accounts and the recommendations by your brokers and to advise you of your rights.