You work hard for your money. Therefore, when you elect to invest your funds, your best interest should and must be the primary objective of your broker and investment firm. Unfortunately, this may not always be the case.

Unless you are well versed in the investment world, you are at the mercy and advice of your investment broker. It is important to research the firm you entrust with your money. Have your contract reviewed by a professional and take care to educate yourself before any money is transferred. Make certain your broker understands what portion of your portfolio you are willing to take risks with and how much of your investment should be placed in safer more stable options. A prime example, for instance, is the difference between actively or passively managed accounts. If you have questions, Cold Spring Advisory Group can help you.

Active (Managed) Investment Accounts

After much research and analysis, brokers claim to have a pulse on current market trends, political influences, the economy, and company information. These insights help them to make an educated guess on which investments will beat the market/index.

Passive investments take a more conservative approach. They are investments that span a longer period of time and keep trades to a minimum. They are not intended to “get rich quick” but to build a strong portfolio over time with greater performance, fewer tax consequences and less chance of human error.

Why would brokers choose active over passive investments?

Although not all managed accounts are short-term accounts, many are. With a higher volume of activity and increased trades comes fees and commissions. These fees do not profit the individual as they are charges against any potential income for the client. The majority of a broker’s income is generated from such commissions.

Unethical brokers churn investments in excess and unnecessarily to line their pockets. It is purely for the brokers benefit with no consideration of their clients. So how do you know if your broker is churning your investment account? There are a few considerations to take notice of whether you suspect foul play or not.

Most importantly, you should pay close attention to the documents received from your brokerage firm. They are required to supply you with documentation on all trades that take place on your account. If you have passive investments, there should not be considerable movement detailed or excessive confirmations. Should you find unusual or increased activity this may be a clear indication your account is being handled inappropriately

It would be prudent to be aware of activity with your annuities and mutual funds for mishandling as well.

Most brokerage firms are required to confirm your decision to move from one annuity or mutual fund to another or to sell them shortly after purchase. They do this simply because it is unusual practice to make these moves as these investments have an upfront load. Their primary objective, therefore, is to make sure this is what you choose to do. They may ask you to sign something acknowledging the transactions or send a confirmation letter detailing these transactions. The firm is concerned that you as their client are aware of the impact these transactions will have on your account.

Huge losses in your account regardless of the market may cause suspicion that your account is being mishandled. Inappropriate commissions will deplete your account and cause your account to underperform.

If you suspect your account is victimized by churning three factors must be established. The three factors are control, excessive trading, and scienter.

  • Control would require proof your broker made these transactions on their accord without your instruction or consent.
  • Determining factors in excessive trading involve the type of account i.e. active investments, your role in the trades and the type of objective you had for your investments.
  • Scienter must be shown through the excessive trading with no regard to you. It was willful and intentional for the sole purpose of self-gain.

How could you possibly know for sure that my broker is churning or mishandling my account? No worries, the experienced and professional team at Cold Spring Advisory Group can help.

Cold Spring Advisory Group (CSAG) offers free consultations. Their team will evaluate your monthly statements and trade confirmations. They are experts in the field of misconduct and mismanagement of investment funds. Your documentation will be scrutinized for: unsuitability, failure to diversify and over concentration, excessive trading, and negligence.  CSAG will determine whether the criteria of the Financial Industry Regulatory Authority (FINRA) has been met. Should such unfortunate suspicions be substantiated, you have the option to retain CSAG on your behalf. CSAG will advise you every step of the way through the entire process.

They are not a team of lawyers but a team of expert consultants. However, they can and will offer reputable law firms who specialize in loss recovery should you decide to move forward with legal action. CSAG will provide your attorney with a detailed accounting which can be used for arbitration. Their services do not stop there.
Should you suspect your broker of misconduct visit Cold Spring Advisory Group. CSAG can get you started today. Why wait? Consultation is free. Should you have been victimized by an unscrupulous broker, it is time to take back what is rightfully yours!