Chicago-based Stoltmann Law Offices represents clients who’ve suffered losses as a result of unsuitable and speculative trading recommendations and strategies. If a broker recommends an awful securities trade – and you lose money – is the broker legally liable? Under rules that govern the conduct of securities brokers and financial advisors through FINRA, the prime U.S. securities regulator, if the trades they recommend are unsuitable, unauthorized, or a part of a larger scheme to defraud, the answer is a resounding “yes”.
A UBS Financial Advisor who promoted to clients the idea of “short-selling” shares of Tesla (symbol TSLA) stock in 2019 and 2020, is accused of multiple violations in a FINRA complaint, according to AdvisorHub.com.
The broker, Andrew Burish, a 38-year industry veteran, recommended shorting Tesla stock, that is, making money on the stock price if it declines. The problem is, during the relevant time period, Tesla stock price went through the roof “triggering more than $23 million in losses for four couples—all members of an extended family—and another investor,” according to an arbitration claim filed with FINRA.
In early 2019, Tesla stock was trading around $60 per share. Since then, its price climbed to more than $720 per share. Burish declined to comment and denied wrongdoing. “His recommendation focused on his conviction that lots of money would be made because Tesla common stock was overvalued and certain to lose its value,” the plaintiffs argued. “No balanced view of the risk of loss was provided by Burish.”
The FINRA complaint, filed in February, accuses UBS and Burish of “breach of fiduciary duty and violating FINRA’s suitability rule and also specifically accuses UBS of failing to supervise the broker.” Burish’s BrokerCheck report shows one other client complaint on his record from 2010 in a case that settled for $1 million of the $1.2 million requested and involved allegedly unsuitable recommendations of structured products in 2008, AdvisorHub reported.
Broker background checks often show past incidents of breaches of duty. Burish’s team had a history of running afoul of clients’ best interests. More recently, in 2018, “UBS terminated a regional compliance officer, a producing branch manager and a junior associate on Burish’s team following allegations about the junior associate’s failure to close out a losing trade and resulting losses, as ordered by senior compliance personnel,” AdvisorHub noted.
When is a broker’s advice unsuitable? If there is a mismatch between your investment objectives, risk tolerance, along with your financial resources, and the investment or investment strategy recommended by the financial advisor, then its possible the recommendation is unsuitable and violates FINRA Rule 2111. Brokers also violate the suitability rule by generating trades to “churn” accounts to conjure-up large commissions. Violating the Suitability Rule is grounds for a negligence-based claim against the brokerage firm with whom the advisor was registered at the time the recommendations were made. They also may promote products with large fees that may not be in the best interest of clients, which would be a breach of fiduciary duty. That’s why it’s always a good idea to check a broker’s record through state securities regulators.
If you financial advisor has made recommendations to you that were un suitable and resulted in investment losses, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!