Broker Fraud Lawyers — Bakhtiari & Harrison

Nationwide Representation for Investors

Bakhtiari & Harrison is a securities law firm representing investors nationwide in broker fraud, stockbroker fraud, and securities misrepresentation claims before the Financial Industry Regulatory Authority (FINRA) and in securities litigation. Broker fraud is actionable under federal securities law and California’s Corporate Securities Law of 1968. Over four decades, the firm has recovered more than $250 million for investors. Ryan Bakhtiari served as Chairman of the FINRA National Arbitration and Mediation Committee and as President of PIABA. Partner David Harrison is a former Morgan Stanley in-house counsel who began his career as a Series 7-licensed registered representative at Shearson Lehman Brothers. Investment fraud cases are handled on a contingency fee basis — no recovery, no fee.

Signs You May Need a Stockbroker Fraud Lawyer

Broker fraud occurs when a broker or financial advisor uses deceptive practices, such as misrepresentation, omission of material facts, or manipulation, to induce an investor to buy or sell securities. Unlike negligence, which requires only proof that the broker fell below the professional standard of care, fraud requires proof of an intentional or reckless misrepresentation on which the investor relied to the investor’s detriment. Both standards can give rise to a FINRA arbitration claim, and a broker fraud attorney at Bakhtiari & Harrison evaluates both in every case.

Broker fraud is actionable under multiple legal frameworks: SEC Rule 10b-5 under the Securities Exchange Act of 1934, California Corporations Code § 25401, and common law fraud. California’s § 25401 is particularly favorable for investors because it does not require proof of scienter — intent to deceive — that Rule 10b-5 requires, making California state law claims easier to prove in many stockbroker fraud cases. Investors pursuing these claims often bring related securities litigation or securities arbitration claims alongside a broker fraud claim, depending on where the misconduct occurred.

Common Forms of Broker Fraud — Talk to a Broker Fraud Attorney

• Misrepresentation: a broker makes a false statement of material fact about a product’s risk level, liquidity, historical performance, or regulatory status that induces the investor to make a purchase. The false statement need not be intentional to be actionable under California law.
• Omission of material facts: a broker fails to disclose information that a reasonable investor would consider important to an investment decision, such as undisclosed fees, conflicts of interest, prior regulatory sanctions, or known product risks.
• Recommendation of unsuitable investments: a broker recommends investments inconsistent with the investor’s risk tolerance, financial situation, or investment objectives, which may be actionable as both fraud and a FINRA suitability violation.
• Self-dealing: a broker recommends an investment in which the broker or firm has an undisclosed financial interest, potentially violating applicable disclosure, conflict-of-interest, suitability, Reg BI, contractual, statutory, or common-law duties. Whether a fiduciary duty applies depends on the nature of the relationship and the governing law.
• Cherry-picking: a broker allocates profitable trades to their own account or favored accounts while directing losses to the investor’s account.
• Front-running: a broker executes trades in their own account ahead of a large client order, profiting at the investor’s expense.
• Churning or excessive trading: a broker trades in and out of the same positions repeatedly, or switches between products for no legitimate reason, generating commissions with each transaction rather than benefit for the investor. See our Churning & Excessive Trading Attorneys page for more.Unauthorized trading: a broker executes a trade in a non-discretionary account without the investor’s permission. This is one of the most common triggers for a FINRA complaint. See our Unauthorized Trading Attorneys page for more.

Broker fraud sometimes overlaps with larger fraudulent investment schemes. A single broker’s misconduct can be part of a Ponzi scheme or other fraudulent scheme operating through a brokerage firm. Before investing further with a broker you’re concerned about, you can review their disciplinary history and licensing status through FINRA BrokerCheck.

A Broker’s Duty of Disclosure — When Silence Becomes Broker Fraud

FINRA rules and securities law impose an affirmative duty on brokers to disclose all material information relevant to an investment recommendation. This duty extends beyond simply avoiding false statements. It requires proactively disclosing conflicts of interest, product risks, fee structures, and other information that a reasonable investor would want to know. A broker who fails to disclose material information, even without making an affirmative false statement, may be liable for fraud by omission.

Regulation Best Interest, which applies to recommendations made to retail investors after June 2020, requires broker-dealers to satisfy disclosure, care, conflict-of-interest, and compliance obligations when making recommendations to retail customers. Violations of Regulation Best Interest are directly actionable in FINRA arbitration.

How a Broker Fraud Claim Moves Through FINRA Arbitration

Most broker fraud claims proceed through FINRA arbitration rather than court, since most brokerage account agreements include a pre-dispute arbitration clause. That clause doesn’t take away your right to bring a claim. It determines the forum.

Once a claim is filed, it generally moves through four stages:

1. A statement of claim is filed setting out the misconduct and damages
2. The parties exchange discovery, including account records, trade confirmations, and communications
3. A panel of arbitrators holds a hearing where both sides present evidence and testimony
4. The panel issues a binding arbitration award, which the losing party must pay within 30 days.

Unlike a court judgment, an arbitration award generally cannot be appealed.

How We Prove a Broker Fraud Claim in FINRA Arbitration

Proving broker fraud requires establishing: (1) a material misrepresentation or omission, (2) made with knowledge or recklessness, (3) on which the investor reasonably relied, and (4) that caused quantifiable financial harm. Under California law, the scienter requirement is eliminated, making California § 25401 claims easier to prove than federal fraud claims. Key evidence in broker fraud cases includes marketing materials, account opening documents, trade confirmations, internal firm communications, and expert testimony on industry standards.

Broker fraud claims against a brokerage firm are typically resolved through FINRA arbitration and litigation rather than litigation in court, under rules set by the Financial Industry Regulatory Authority. Ryan Bakhtiari’s tenure chairing FINRA’s national arbitration rulemaking committee gives the firm direct insight into how these proceedings are run.

California Corporations Code — Additional Protections for Investors

California investors have access to Corporations Code § 25401, which prohibits misrepresentations and omissions in connection with securities transactions and does not require proof of intent. California § 25501 may provide a rescission remedy for a purchaser who establishes a violation of § 25401, subject to the statute’s requirements, defenses, and applicable offsets. The applicable limitations period should be analyzed under § 25506 and the facts of the particular transaction. Bakhtiari & Harrison layers California state law claims alongside federal and FINRA claims to maximize recovery for California investors.

Frequently asked questions — Broker Fraud Claims

Speak With a Broker Fraud Attorney — Free, Confidential Consultation

Our FINRA attorneys review every potential investor claim at no charge. Investment fraud cases are handled on a contingency fee basis — no recovery, no fee.

Call (800) 382-7969 Contact Us