Employee Stock Options Attorneys — Bakhtiari & Harrison
Employee equity compensation — a prime target for broker misconduct
Employee stock options, restricted stock units, and performance share units represent a significant and growing portion of total compensation for professionals in technology, aerospace, financial services, entertainment, and other industries. When these awards vest — often in large, concentrated blocks — employees face complex financial decisions about when to sell, how to diversify, and how to manage tax consequences. These moments of complexity are precisely when unscrupulous brokers strike.
Brokers who serve equity compensation clients face an inherent conflict of interest: diversifying a concentrated vesting position generates a one-time transaction and moves assets into a lower-commission portfolio. Recommending that the client hold the concentrated position — or use it as collateral for margin borrowing — generates ongoing commissions and fees. Bakhtiari & Harrison has represented technology professionals, senior executives, and financial industry employees whose equity compensation was mismanaged through exactly this conflict.
Types of employee stock option and equity compensation claims
Unsuitable hold recommendations for concentrated positions
After a vesting event, a broker who recommends holding a concentrated single-stock position rather than implementing a diversification strategy may be liable for the losses that result when the stock declines. The suitability analysis requires considering the investor’s total financial picture — including the fact that their employment income and investment wealth are both tied to the same company’s performance. Recommending concentration of both income and investment assets in a single employer is difficult to justify for most investor profiles.
RSU and option exercise strategy mismanagement
Brokers advising on RSU vesting and option exercise timing have fiduciary and suitability obligations with respect to those recommendations. Common misconduct includes recommending same-day sales at suboptimal times for the broker’s convenience rather than the investor’s benefit, failing to account for tax consequences in the exercise strategy, and recommending early exercise of underwater options without adequate justification.
Margin abuse using equity compensation as collateral
Equity compensation holdings are frequently used as collateral for margin borrowing — allowing the investor to purchase additional investments while retaining the concentrated position. When the stock declines, the investor faces a margin call that can force liquidation of both the vesting position and the margin-purchased investments simultaneously, producing compounded losses. Bakhtiari & Harrison pursues margin abuse claims involving equity compensation collateral as both a suitability violation and an overconcentration claim.
Hedging strategy misrepresentation
Sophisticated equity compensation strategies — including exchange funds, variable prepaid forwards, collars, and protective puts — have been recommended to equity compensation holders with inadequate disclosure of their costs, tax consequences, risks, and conflicts of interest. When a broker recommends a hedging strategy that primarily benefits the broker’s firm while exposing the investor to undisclosed risks, the recommendation may be actionable.
California and Silicon Beach — the equity compensation fraud landscape
California’s technology industry — concentrated in Silicon Valley, Silicon Beach (Culver City, Santa Monica, Playa Vista), and the broader Los Angeles tech corridor — produces the highest volume of RSU and option vesting events of any market in the country. Bakhtiari & Harrison is headquartered in Studio City and has represented technology professionals throughout Southern California in equity compensation mismanagement claims. Ryan Bakhtiari’s FINRA NAMC chairmanship and David Harrison’s Morgan Stanley background give the firm specific knowledge of how major brokerage firms handle equity compensation accounts — and where their conduct falls short.
Frequently asked questions — employee stock options
Can I file a FINRA arbitration claim for mismanagement of my RSUs or stock options?
Yes — if your broker is FINRA-registered and managed your equity compensation through a brokerage account, you may have a FINRA arbitration claim for unsuitable recommendations, failure to disclose conflicts of interest, or margin abuse. Bakhtiari & Harrison evaluates all equity compensation claims at no charge in a free initial consultation.
My company stock dropped significantly after my RSUs vested and I held at my broker’s recommendation — do I have a claim?
Possibly. The key questions are whether a hold recommendation was consistent with your financial profile — including your total exposure to your employer’s performance through both employment and investment — and whether the broker adequately disclosed the risks of concentration. If the broker recommended holding a concentrated single-stock position without adequate justification given your overall financial situation, you may have a viable suitability claim.
My broker used my vested stock as margin collateral and I suffered a margin call — what can I do?
Contact Bakhtiari & Harrison immediately. Margin calls on equity compensation collateral can produce compounded, catastrophic losses. The firm evaluates margin abuse claims involving equity compensation at no charge and pursues recovery from both the individual broker and the brokerage firm.
Does the firm handle equity compensation claims for financial industry employees?
Yes. Financial industry employees — including bankers, traders, and advisers — frequently have significant equity compensation from their own employers. David Harrison’s background as Morgan Stanley in-house counsel gives the firm specific knowledge of how financial industry equity compensation is structured and how brokers have mismanaged it.
For a full overview of the firm’s investor representation practice, visit the Advisor Misconduct page.
Contact a employee stock options attorney — free consultation
Contact Bakhtiari & Harrison for a free, confidential consultation. 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.
Call: (800) 382-7969 | Contact Us