Unsuitable Investment Claims

Advisors are responsible for knowing their clients’ financial needs. Unsuitability claims involve investment recommendations and sales that are not consistent with an investor’s investment objectives and goals, risk tolerance and financial situation.

Every brokerage firm and stockbroker is responsible for knowing their clients’ financial needs and characteristics. Unsuitability claims involve investment recommendations and sales that are not consistent with an investor’s investment objectives and goals, risk tolerance, and financial situation. Such claims generally reflect a brokerage firm’s or broker’s lack of concern for these factors.

For example, an investment that is suitable for a young investor willing and able to accept a significant risk of loss in exchange for the prospect of high returnsmight be unsuitable for a retiree who needs to preserve their savings and who is dependent on stable income from their investments. We analyze unsuitable investment claims by considering factors such as:

• Did the broker meet with you to discuss your financial circumstances, your investment objectives and goals, and your risk tolerance?
• What did you explain to the broker about your financial circumstances, your investment objectives and goals, and your risk tolerance?
• Did the broker correctly and fully explain the investments that were recommended and sold to you?
• Did the broker accurately explain the risks associated with the investments that were recommended and sold to you?
• Did recommended investments expose you to unreasonable risk of loss?
• Were recommended investments inconsistent with either your risk tolerance or your investment objectives and goals?