What is financial advisor misconduct?

Financial advisor misconduct refers to actions by a broker or investment advisor that violate securities laws, FINRA rules, or their duty to act in a client's best interest. Common forms include: making unsuitable investment recommendations, misrepresenting or omitting material facts, churning (excessive trading to generate commissions), unauthorized trading, over-concentrating a portfolio in a single security or sector, failing to supervise employees, and outright fraud or theft. Investors who suffer losses due to advisor misconduct can pursue recovery through FINRA arbitration.

What is a suitability claim against a financial advisor?

A suitability claim arises when a broker recommends investments that are not appropriate for a client's financial situation, risk tolerance, investment objectives, or time horizon. Under FINRA Rule 2111, brokers must have a reasonable basis to believe a recommendation is suitable for the specific customer. Recommending high-risk products to a retiree seeking income, or concentrating a portfolio in speculative securities for a conservative investor, are common examples of suitability violations that can support a FINRA arbitration claim.

Can I sue my financial advisor for investment losses?

Yes, investors can pursue legal claims against financial advisors for losses caused by misconduct. Most brokerage account agreements require disputes to be resolved through FINRA arbitration rather than court. To have a viable claim, the losses must have been caused by the advisor's wrongdoing — not simply by market declines. A securities attorney can evaluate whether your losses resulted from actionable misconduct. Bakhtiari & Harrison offers free consultations.

What is the largest FINRA arbitration award Bakhtiari & Harrison has won?

In 2011, Bakhtiari & Harrison won the largest FINRA arbitration award of that year — a $54 million award against Citigroup Global Markets, including $17 million in punitive damages, on behalf of two individual investors who suffered losses in Citigroup's Mat/ASTA leveraged municipal arbitrage fund. The award was described by the Wall Street Journal as the largest ever levied against a major Wall Street brokerage in favor of individual investors. The award was later confirmed by the U.S. District Court for the District of Colorado.

Does Bakhtiari & Harrison represent celebrity and athlete investors?

Yes. Bakhtiari & Harrison has represented professional athletes in the NFL, NBA, MLB, NHL, and Olympic Games, as well as entertainers and public figures, in securities fraud and investment misconduct cases. High-profile clients are frequent targets of unsuitable investments, fraudulent schemes, and advisors who exploit trust relationships. The firm handles these cases with the same level of confidentiality and strategic rigor as any other matter. In 2022, the firm represented multiple professional athletes including Lauren Holiday, Jrue Holiday, Chandler Parsons, and Courtney Lee in claims involving nearly $10 million in investment losses.

Broker Misconduct Attorneys — Bakhtiari & Harrison

Written and reviewed by

David Harrison, Partner — Bakhtiari & Harrison

Admitted: CA | NY · Super Lawyers 2015–2026 · Former NYC Assistant District Attorney · Former Morgan Stanley In-House Counsel · Series 7 Licensed · Last reviewed: May 2026

Bakhtiari & Harrison represents investors in broker misconduct claims in FINRA arbitration and securities litigation nationwide. Broker misconduct encompasses the full range of dishonest, unsuitable, and unauthorized conduct by registered brokers and financial advisors — from recommending investments that were never appropriate for the investor, to executing unauthorized trades, to outright fraud. David Harrison is a former Morgan Stanley Dean Witter in-house counsel who began his career as a Series 7-licensed registered representative at Shearson Lehman Brothers — giving the firm direct institutional knowledge of how brokerage firms handle misconduct claims from the inside. Partner Ryan Bakhtiari served as Chairman of the FINRA National Arbitration and Mediation Committee from 2013 to 2017. The firm has recovered more than $250 million for clients over four decades. Investor cases are handled on a contingency fee basis — no recovery, no fee.

What is broker misconduct?

Broker misconduct is any conduct by a FINRA-registered broker or financial advisor that violates the securities laws, FINRA rules, or the duties owed to the investor. It covers a wide spectrum — from the technically complex, such as recommending a structured product whose risk profile was inconsistent with the investor’s financial situation, to the blatantly dishonest, such as executing trades without client authorization or misappropriating client funds.

The common thread is a breach of the obligations that brokers owe to their clients. Those obligations are not merely contractual — they are regulatory requirements enforced by FINRA, the SEC, and state securities regulators, backed by legal rights that investors can enforce through FINRA arbitration.

Common forms of broker misconduct

Unsuitable investment recommendations

FINRA Rule 2111 and Regulation Best Interest require brokers to recommend only investments that are suitable for the specific investor based on their financial situation, risk tolerance, investment objectives, time horizon, and liquidity needs. Recommending investments that do not meet this standard — regardless of whether the broker believed the investment was good — is a suitability violation. For more detail on suitability claims visit the Advisor Misconduct page.

Unauthorized trading

Executing transactions in a client’s account without prior authorization is one of the most clearly actionable forms of broker misconduct. Unless the account is a discretionary account with written authorization for the broker to trade without prior client approval, every transaction requires the client’s consent before execution. Unauthorized trading violates the account agreement and FINRA rules. For more on unauthorized trading claims visit the Unauthorized Trading page.

Churning and excessive trading

Churning occurs when a broker executes trades at a frequency and volume that is inconsistent with the investor’s investment objectives and primarily serves to generate commissions for the broker rather than returns for the client. FINRA Rule 2111 treats excessive trading as a form of unsuitability. Churning claims require analysis of the account’s turnover ratio, cost-to-equity ratio, and the broker’s in-and-out trading pattern. For more on churning claims visit the Churning page.

Misrepresentation and omission

Brokers who make false statements about an investment — or who fail to disclose material information that would affect the investor’s decision — commit actionable misrepresentation and omission under federal securities law and FINRA rules. Common misrepresentations include overstating expected returns, understating risks, mischaracterizing the liquidity of a product, and concealing conflicts of interest. For more on misrepresentation claims visit the Broker Fraud page.

Overconcentration

Placing an excessive proportion of an investor’s portfolio in a single security, sector, or illiquid product creates concentration risk that is inconsistent with sound portfolio management and the investor’s need for diversification. Overconcentration claims arise when a broker’s failure to diversify — or an affirmative recommendation to concentrate — causes losses when the concentrated position declines. For more visit the Asset Allocation page.

Failure to supervise

Brokerage firms bear independent liability under FINRA Rule 3110 when their supervisory failures allow broker misconduct to continue and cause investor losses. Even when the individual broker has no assets, the firm’s failure to supervise makes the firm — which has far greater resources — independently liable for the full extent of the investor’s losses. For more on failure to supervise claims visit the Failure to Supervise page.

Elder financial fraud

Brokers who exploit elderly or vulnerable investors through unsuitable recommendations, misrepresentation, or outright fraud face enhanced liability. Federal and state elder financial abuse statutes — including California Welfare & Institutions Code § 15657.5 — provide additional remedies including treble damages and attorneys’ fee recovery for qualifying elder financial fraud claims. For more visit the Elder Fraud page.

Can I sue my broker for misconduct?

Most investor claims against FINRA-registered brokers and broker-dealers are resolved through FINRA arbitration — not court litigation. When you open a brokerage account, you typically sign a customer agreement that includes a mandatory arbitration clause requiring disputes to be resolved through FINRA arbitration rather than court.

FINRA arbitration is a private, binding dispute resolution process that is generally faster and less expensive than court litigation. Awards are final and enforceable in federal court. Bakhtiari & Harrison manages the complete FINRA arbitration process on behalf of investors — from the initial claim evaluation through the evidentiary hearing and, if necessary, award enforcement.

The key question is not whether you can sue — it is whether your claim is strong enough to pursue and what your realistic range of recovery is. Bakhtiari & Harrison evaluates every broker misconduct claim at no charge.

What damages can I recover for broker misconduct?

Compensatory damages: the difference between what you would have earned in a suitable investment and what you actually earned — not just the principal lost.
Consequential damages: additional losses caused by the misconduct beyond the direct investment loss.
Interest: prejudgment interest on damages from the date of the wrong.
Punitive damages: available in cases of egregious misconduct — fraud, recklessness, or willful violation of securities laws. Bakhtiari & Harrison’s $54.1 million Citigroup award included $17 million in punitive damages.
Attorneys’ fees: recoverable in certain cases including elder financial abuse claims under California law.

Our extensive knowledge of broker misconduct cases

David Harrison spent years as in-house counsel at Morgan Stanley Dean Witter — sitting on the other side of investor claims and advising the firm on how to defend against them. He began his career as a Series 7-licensed registered representative at Shearson Lehman Brothers. He knows how broker misconduct cases are defended from the inside — which arguments brokerage firms make, which defenses are vulnerable, and how to build investor claims that are difficult to defeat.

This institutional knowledge is a direct strategic advantage in FINRA arbitration. It is not something that can be replicated by attorneys who have only ever practiced on the investor side.

Frequently asked questions — broker misconduct

How do I know if my broker committed misconduct?

The most reliable way to determine whether your losses resulted from broker misconduct or legitimate market risk is to have your account records reviewed by an experienced securities attorney. Bakhtiari & Harrison provides free initial consultations and reviews account statements, trade confirmations, and correspondence to identify whether your losses reflect actionable misconduct.

What is the deadline to file a broker misconduct claim?

Under FINRA Rule 12206, claims must be filed within six years of the events giving rise to the dispute. State law claims may have shorter limitations periods. Time limits are strictly enforced — missing the deadline permanently forecloses recovery. Contact Bakhtiari & Harrison promptly.

My broker is no longer at the firm — can I still bring a claim?

Yes. The brokerage firm that employed the broker at the time of the misconduct faces independent liability for failure to supervise — regardless of whether the broker is still employed there. In most cases the firm is the more important defendant, because the firm has greater financial resources and its supervisory failures allowed the misconduct to continue.

What if I signed an arbitration agreement — can I still bring a claim?

Yes — the arbitration agreement determines the forum for your claim, not whether you have a claim. Virtually all investor claims against FINRA-registered broker-dealers are resolved through FINRA arbitration. The arbitration agreement does not limit your ability to recover damages — it simply means your case is heard by a FINRA arbitration panel rather than a court jury.

Does Bakhtiari & Harrison handle broker misconduct claims nationwide?

Yes. Bakhtiari & Harrison represents investors in broker misconduct claims throughout the United States. Ryan Bakhtiari is admitted in California, New York, Texas, the District of Columbia, and multiple federal courts. FINRA arbitration hearings are held at the regional location nearest the claimant.

Contact a broker misconduct attorney — free consultation

Contact Bakhtiari & Harrison for a free, confidential evaluation of your broker misconduct claim. Our FINRA attorneys review every potential investor claim at no charge. Investor cases are handled on a contingency fee basis — no recovery, no fee.

Investor cases are handled on a contingency fee basis — no recovery, no fee.

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