Misrepresentation: A Common Pitfall For Brokers

Misrepresentation, a violation of FINRA Rule 2020, is a serious offense that can have significant consequences for brokers. This rule prohibits brokers from using manipulative or deceptive devices when selling securities. While it may seem straightforward, misrepresentation can occur in many subtle ways and often unintentionally.

Common Misrepresentation Scenarios

Here are some common scenarios in which brokers may inadvertently fall into the trap of a misrepresentation-related violation:

1. Exaggerating Returns Or Downplaying Risks:

• Overpromising: Brokers may overstate the potential returns of an investment, particularly in a hot market.
• Minimizing Risk: They may downplay the risks associated with an investment, such as market volatility or the possibility of loss.

2. Misleading Statements About Fees & Costs:

• Omitting Fees: Brokers may fail to disclose all fees and costs associated with an investment, such as commissions, transaction fees, or advisory fees.
• Misrepresenting Fee Structures: They may misrepresent the fee structure of a product, such as claiming a lower fee than what is actually charged.

3. Providing Inaccurate Information About A Security:

• Outdated Information: Brokers may rely on outdated information about a security, such as its performance history or financial health.
• Selective Disclosure: They may selectively disclose information about a security, highlighting positive aspects while downplaying negative ones.

4. Making Unsubstantiated Claims:

• Guaranteeing Returns: Brokers may make claims about guaranteed returns, which are often unrealistic and misleading.
• Predicting Market Trends: They may predict future market trends without a solid basis for their forecasts.

Avoiding Misrepresentation

To avoid misrepresentation, brokers should adhere to the following best practices:

• Know Your Products: Thoroughly understand the products you are selling, including their risks and benefits.
• Disclose All Material Facts: Be transparent about all material facts, including fees, costs, and potential risks.
• Avoid Making Exaggerated Claims: Stick to the facts and avoid making unsubstantiated claims.
• Document All Communications: Keep detailed records of all communications with clients.
• Stay Up To Date: Keep abreast of industry regulations and market developments.
• Seek Guidance: When in doubt, consult with compliance officers or legal counsel.

Expungement

If a broker is accused of misrepresentation, it is crucial to address the allegations promptly and effectively. In some cases, expungement may be a viable option to clear a broker's record of unfounded or inaccurate information. Expungement can help to restore a broker's reputation and protect their career.

AdvisorLaw: Your Partner In Expungement

We understand the devastating impact that false or unfounded allegations can have on a broker's career. Our team of experienced attorneys is dedicated to helping brokers navigate the complex process of expungement.

Recent Success Stories

Here are a few examples of how AdvisorLaw has helped brokers remove false or unfounded allegations from their BrokerCheck records:

• A 30-Year Veteran Cleared Of Unfounded Claims: An LA-based financial advisor with a 30-year career had a single disclosure on his otherwise perfect record. Despite the claim being dismissed, it contained detailed allegations and damages exceeding $400K. With our help, the advisor successfully expunged the meritless claim, restoring his reputation and allowing him to move forward with his career.
• Three Settled Claims Expunged: A California advisor with nearly 40 years of experience had three settled customer disputes on his record. We successfully argued for the expungement of all three claims, restoring the advisor's perfect record and allowing him to celebrate his 40th year in the industry.
• A False Claim Removed: A California advisor with a 25-year career had a single customer dispute on his record. We successfully argued for the expungement of the false claim, restoring the advisor's perfect record and allowing him to continue his successful career.

The Expungement Process

If you're facing a misrepresentation allegation, we can help. Below are some of the efforts that our team of experienced attorneys may employ.

• Thorough investigation of your case: we carefully review the allegations and gather evidence to support your defense.
• Developing a strong defense strategy: we develop a customized defense strategy to protect your interests.
• Representation before FINRA: we represent you before FINRA and other regulatory bodies.
• Negotiating a favorable settlement: we work to negotiate a favorable settlement, when possible.
• Pursuing expungement: when appropriate, we pursue expungement to remove false or unfounded allegations from your BrokerCheck record.

Don't let a false accusation derail your career.

A false or unfounded allegation can have a devastating impact on a broker's career. If you're facing a misrepresentation claim, don't hesitate to seek advice. We’re here to help you protect your reputation and your future. Contact us today for a complimentary consultation.