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Securities Fraud Attorneys Representing Clients in New York and Nationwide

Investor-Focused Representation

Fitapelli Kurta is a national law firm that represents investors in cases involving investment and securities fraud. Our securities fraud practice is unique because our law firm does not represent any banks or major financial institutions - only harmed investors. We also never charge hourly for our services. We only accept cases on contingency, meaning our firm is not paid anything unless we are able to successfully recover funds on our client's behalf. Because we work this way, we have a vested financial interest in the success of all of our cases. If our clients aren't successful, neither are we.

Proven Track Record

We have recovered over $100 million prosecuting investment and securities fraud cases for investors throughout the United States. While most of our cases conclude with a confidential settlement, our firm has taken numerous cases to verdict - achieving multiple individual verdicts in excess $1 million. This willingness to try difficult cases has earned us industry awards and favorable press. However, and more importantly, our successful track record has also earned us a reputation in the financial industry among major financial institutions and the large law firms that they employ to defend them. We are known in the industry as being smart, aggressive and creative litigators.

Often, investors retain professionals to make investment decisions for them because they do not have expertise in securities and other investments. Brokers owe a duty to investors, who have entrusted them with these critical decisions. Unfortunately, not all brokers are trustworthy. If you were a victim of stock fraud anywhere in the U.S., the experienced securities fraud lawyers at Fitapelli Kurta stand ready to help you. Our knowledgeable team can investigate the specifics of your situation and pursue recovery from any parties responsible for defrauding you.

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Discuss Your Case with a Skilled Securities Fraud Attorney

If you were a victim of fraud in the securities industry, you can consult the securities attorneys of Fitapelli & Kurta. Our founding members began their legal careers at large defense firms, representing investment professionals and organizations. However, they now dedicate their valuable time, knowledge, and insights to serving investors who have been wronged. We have substantial skills and resources and have earned notable results for investors across the nation, including many arbitration settlements that have totaled millions. Call us toll-free at (877) 238-4175 or use our online form to set up an appointment.

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Federal Securities Laws

Account Churning

The SEC prohibits account churning. Churning occurs when a broker conducts excessive transactions, whether these are purchases or sales of stock, to generate commissions instead of to advance the investment objectives of a client. It usually happens if a broker has complete control over a client's investment transactions, such as when discretionary or managed funds are involved. Brokers are supposed to act in accordance with laws and regulations, including those promulgated by the Financial Industry Regulatory Authority (FINRA). They should reasonably believe that a transaction is suitable for a particular client, based on the client's objectives and financial circumstances, if they enter into a transaction on the client's behalf.

Boiler Rooms

Near the end of the 20^th century, an investigator for the SEC described boiler rooms as follows,

“The brokers sat "cheek by jowl" in a room the size of a basketball court. All of their desks were lined up side by side in rows. The firm held mandatory sales meetings every morning at 8:30 a.m. at which time sales techniques were demonstrated and scripts for the firm's "house stock" . . . were distributed. Brokers were expected to follow the scripts and only give customers the information they contained.”

While the image of a boiler room has changed with the invention of the internet, the idea remains the same. A group of brokers create the demand for the stock where no actual market exists. They will attract buyers using high pressure sale tactics and coercive techniques taught to them by the firm. Once a buyer is on board, the stock shoots up giving the illusion of high demand, when in reality it is just a group of investors being talked into buying something they don’t want or need.

The following are telltale signs of boiler rooms:

High pressure sales tactics
Cold calls/ unsolicited calls from brokers
Discouraged from doing outside research
Only told good things about the stock, not bad
Encouraged to make investment decision immediately
Scripted sales answers

If you or someone you know suspect they are the victim of a boiler room and have lost money as a result of an investment, you may be entitled to compensation for you losses. Contact Fitapelli Kurta today to discuss the merits of your case at absolutely no cost to you.

Breach of Contract

Sometimes harm to an investor is a result of a breach of a contract rather than fraud. When you open an account with a brokerage firm, you may be given to understand that your account will be handled in a certain way. Breach of contract can occur in a securities context when a brokerage firm or other financial professional does not abide by an agreement with an investor regarding an account. Typically, when an investment account is opened, a new account agreement is signed in which the brokerage firm agrees to certain obligations toward the investor. There may be implied or oral promises as well. In New York, for example, a securities fraud lawyer can show a breach of contract by proving that there was a valid contract, one or more parties materially failed to meet the contractual terms, and the breach caused damages.

Breach of Fiduciary Duty

If you are an investor, you should be aware that certain advisors owe you a fiduciary duty, meaning that they must use their special knowledge and skill and put forth their best efforts for your benefit. Generally, an investment adviser who owes you a fiduciary duty needs to use reasonable care when acting on your behalf or advising you, should avoid misleading you, needs to look out for the best price and terms with each transaction, and should put your interests above their own. A fiduciary should not utilize your assets for their benefit, should fully disclose material facts about transactions, should avoid conflicts of interest when possible, and should disclose potential conflicts of interest. A breach of fiduciary duty can happen in many different ways. It can include misrepresentation, unauthorized trading, or churning. However, not all financial professionals owe a fiduciary duty, and it is important to consult an experienced securities fraud attorney if you believe that you have a claim.

Failure to Diversify

One of the most effective ways to manage risk in an investment strategy is by diversifying a portfolio. As the old saying goes, “don’t put all your eggs in one basket.” While this is perhaps one of the most fundamental rules of investing, it is also one that is often ignored. Stock brokers and financial advisors have a fundamental obligation to diversity their customer’s holdings across different sectors and asset classes. The failure to diversify can often lead to significant losses.

The Fifth Circuit Court of Appeals, in Metzler v. Graham, explained that it is difficult to establish a fixed percentage in evaluating failure to diversify cases, explaining, “[t]he degree of investment concentration that would violate this requirement to diversify cannot be stated as a fixed percentage, because a fiduciary must consider the facts and circumstances of each case.” Metzler v. Graham, 112 F.3d 207 (5th Cir. 1997). The Financial Industry Regulatory Authority, or FINRA, offers a similar note of warning, “[t]here is no simple or single answer that is right for everyone. Whether your stock portfolio includes six securities, 20 securities or more is a decision you have to make in consultation with your investment professional or based on your own research and judgment.”

While it is correct that courts and arbitration panels evaluate failure to diversify cases on a case-by-case basis, there are a number of court cases that provide examples of impermissible conduct. We have summarized cases from several jurisdictions below.

GIW Industries, Inc. v. Trevor, Stewart, Burton & Jacobsen, Inc., was an Eleventh Circuit Court of Appeals decision concerning the failure to diversify a bond portfolio. The case originated from a district court decision in Georgia. The Court found that a concentration of 70% in government bonds with a single maturity date created an unreasonable risk. see GIW Industries, Inc. v. Trevor, Stewart, Burton & Jacobsen, Inc., 895 F.2d 729 (11th Cir. 1990).

In Culbertson v. J.J.B Hillard and W.L. Lyons, a FINRA arbitration panel in Ohio awarded $129,000 in compensatory damages as well as $45,150 in attorneys’ fees. FINRA Case 11-03226. The case concerned the brokers, failure to diversify a client’s account. According to the FINRA award, the Claimant alleged that her assets were over-concentrated almost exclusively in low-growth cash and fixed income investments.

In re Estate of Janes, was a 1997 cases decided by the New York State Court of Appeals, which, despite the misnomer, is the highest court in New York State. In that case, the Court found that there was sufficient evidence at trial to find that an investment portfolio, which included a 71% concentration in Kodak stock constituted a failure to diversify. See In re Estate of Janes, 90 N.Y.2d 41 (N.Y. 1997). The trial court in arriving at this conclusion that the investment allocation was not diversified also considered the age and lifestyle of the investor, who was a 72 year old widow.

In a Securities and Exchange Commission administrative proceeding, Paine Webber, Inc. was ordered to, among other things, pay an administrative fine of $5 million for failing to diversify client assets. This case is significant because it involved illiquid private placements rather than traditional equities like stocks or mutual funds.

In Plasterers’ Local Union v. Pepper, was a Fourth Circuit Court of Appeals case concerning the failure to diversify certificate of deposits. The case concerned an appeal of a Maryland district court holding. The appeals court found that the Maryland district court appropriately found that a concentration in conservative investments of CDs of less than $100,000 and treasury bills was unreasonable. However, the case was ultimately remanded back to the district court to calculate what damages, if any, should be awarded. Plasterers’ Local Union v. Pepper, 663 F.3d 210 (4th Cir. 2011).

In Van Billiard v. Farrell Distrib. Corp., a federal district court in Vermont held that a plaintiff demonstrated a prima facie case, defeating a motion to dismiss, by alleging that the defendant invested over 90% of their assets in equities and only 10% in fixed income. Van Billiard v. Farrell Distrib. Corp., 2009 U.S. Dist. LEXIS 112381, 2009 WL 4729965 (D. Vt. Dec. 3, 2009).

If you or someone you know suffered investment losses due to a non-diversified portfolio, you may be able to recover your losses. Contact the law firm of Fitapelli Kurta today for a free and confidential consultations.

Failure to Execute Trades

Failure to Follow Instructions

There is little incentive for a stockbroker not to place an order. However, millions of transactions occur each day and mistakes do happen, including failures to place orders. With the rise of technology, it has become more infrequent that orders become lost, but that does happen occasionally.Investment clients can take action for such negligence against the broker or broker-dealer.

At times, a broker may not wish to execute a transaction that the client requests. A customer may want to sell a stock, but broker does not think that is a good idea. If the broker were to dissuade the client from executing a certain transaction, then it would be difficult for the client to later try to recover damages.

It is important to realize that the failure to place the order must result in damages. For example, if the stockbroker does not sell and the price drops, then the stockbroker would not be liable for damages.

Help us evaluate whether you can seek recovery for “failure to execute” by contacting us to request a free consultation.

Failure to Supervise

Under both federal securities laws and FINRA regulations, broker-dealers are supposed to supervise their brokers. Section 15(b)(4)(E) of the Securities Exchange Act of 1934 obligates broker-dealers to reasonably supervise brokers in order to prevent securities violations. Broker-dealers are supposed to train brokers appropriately, make sure that brokers recommend suitable investments, and make sure that brokers give investors accurate information. Your securities fraud lawyer may be able to hold a brokerage firm responsible for a broker's negligent or intentional acts. Brokers must comply with the duty of suitability and must not put their own interests ahead of client interests.

Financial Elder Abuse

Elderly people are vulnerable to fraud, Ponzi schemes, and financial abuse. Often, their isolation, incapacitation, or other disabilities render them particularly susceptible to scams. It can be difficult to spot financial elder abuse because the person perpetrating the abuse may persuade the target that the actions are in their best interest. If you are an elderly investor, it is critical to research any broker or other financial firm to make sure that it is registered with the SEC and FINRA. FINRA's BrokerCheck Report allows you to conduct this necessary research and to determine whether a broker or firm has prior FINRA disputes or arbitrations. You should consult an experienced securities fraud attorney if you suspect that you or an elderly loved one has been a victim of churning, misrepresentation, or other abuses.

Fraud

Securities Attorneys Serving Investors Nationwide

In today’s complex financial markets, trading has reached an all-time high, and the number of elaborate new investment strategies is rapidly increasing. These schemes are often difficult for the average investor to understand. Moreover, even standard investment accounts are vulnerable to acts of fraud by the professionals who manage them. The securities fraud lawyers at Fitapelli Kurta began their careers defending investment firms, but we are now solely dedicated to protecting the rights of investors throughout the nation. Our legal team knows how firms work and what legal strategies they use. Let us use that knowledge to your benefit.

Broker Malfeasance on the Rise

Investment fraud is the term used for any deceptive practice that is carried out for the purpose of inducing investors to make investment decisions. It can include a wide range of actions, such as insider trading, account churning, and broker embezzlement.

Not only can stock fraud result in financial devastation for investors, but it can also have a negative effect on securities markets. The increase of investment fraud has led the industry to enact a number of rules designed to protect investors. Broker fraud is strictly prohibited, and cases involving it are taken seriously by agencies that control the securities industry. The securities attorneys at Fitapelli Kurta are accomplished in litigating fraud claims, particularly before the Financial Industry Regulatory Authority (FINRA), a resolution forum for securities disputes. With successes totaling millions of dollars, our aggressive lawyers are dedicated to pursuing the best possible outcomes for our clients.

Proving a Fraud Claim Against an Investment Professional

A claim of investment fraud requires an investor to prove several elements. First, there must be evidence that a broker made a knowing, false representation about a material fact. This is something that would be considered crucial for the reasonable investor when weighing an investment decision.

There must also be proof that the broker acted with intent to mislead or commit fraud. This is often a difficult burden. However, every broker is subject to guidelines created by the Securities Exchange Commission (SEC), which is the agency primarily responsible for regulating the securities industry and enforcing the laws governing it. In order to reduce fraud, the SEC has developed rules requiring brokers to conduct transactions within a client’s risk level, disclose material information to investors, reveal all conflicts of interest, obtain client consent before conducting a transaction, and follow a client’s orders when buying or selling stocks. These guidelines provide clear direction for brokers, and deviation from them can be indicative of intent to commit fraud.

An investor must also show that he or she reasonably relied on the broker’s statements. Given the relationship between most investors and brokers, this is generally not a difficult burden. Most people typically do not have sophisticated knowledge about investments and depend on brokers for their expertise in the area. As a result, it is only rational that investors rely on an adviser’s advice and information. Finally, there must be evidence of an injury, or a financial loss as the result of a broker’s actions.

There can be a number of challenges to a claim for investment fraud. It is common for brokers to assert a defense that they did not knowingly violate a particular rule. Moreover, there are certain time limitations for bringing a fraud case. Federal laws set forth the timeframe in which stock fraud cases must be brought, but determining when that period of time starts to run can be complicated. Fortunately, the legal team of securities attorneys at Fitapelli Kurta is experienced in overcoming these hurdles and can help guide you through the resolution of your claim.

Misrepresentation

Tenacious Investment Fraud Attorneys Skilled in Stock Fraud Claims

The stock fraud lawyers at Fitapelli Kurta are experienced in taking legal action against investment brokers and advisers who have caused investors’ losses. From our office in New York, we represent clients across the United States in a wide variety of claims, including broker misrepresentation. The securities attorneys at Fitapelli Kurta can analyze the facts of your case and explore the legal solutions appropriate to your goals. We have significant experience arbitrating investor claims before the Financial Industry Regulatory Authority (FINRA), and we have recovered millions of dollars for our clients.

Holding Brokers Accountable for Misrepresentations and Omissions

The Securities Exchange Act is the federal law that regulates the securities industry and protects investors from fraud and other bad acts by investment professionals. The Act is also responsible for allowing individuals to bring a private lawsuit for financial losses related to the sale or purchase of securities.

One of the main ways that the Act protects investors is by prohibiting brokers from making untrue or false statements that can mislead their clients. This also includes omitting to disclose material facts regarding an investment or the effect that an investment could have on the client’s finances. A “material fact” is a piece of information that would be a significant consideration for a reasonable investor in making a decision about an investment. Some examples include the risk level of a stock, the potential return on an investment, or the fees involved with the transaction.

In order to be successful on a claim of misrepresentation, an investor must show that an investment professional knowingly made a false representation of a material fact. It must also be proven that the broker or adviser intended that the client rely on his or her misrepresentation. Finally, an investor must show that he or she justifiably relied on the misrepresentation and suffered damages as a result of that reliance. An individual bringing this type of lawsuit must be able to show that the misrepresentation was a substantial reason for the investment decision.

There are also cases where an investor may suspect that his or her broker did not disclose important information regarding a stock or security. In those situations, he or she still has a claim if it is possible to show that the broker knowingly omitted material facts that were necessary to make the investment advice truthful. There may be a presumption of reliance in situations when an investor could reasonably expect that the broker would disclose material information. A presumption makes it easier for an individual to succeed in showing a particular requirement of a claim, even if there is little or no evidence to prove it.

Finally, it is important to note that investment professionals owe a fiduciary duty to their clients, which requires them to place their clients’ interests above their own financial interests. Therefore, advisers have a duty to disclose material information to investors regarding any and all conflicts of interest.

Ponzi Schemes

It can be challenging to recognize Ponzi schemes. Ponzi schemes occur when an operator pays investors returns from money made from new investors rather than from the investment's actual profits. The operator keeps the profit that is actually made, and any payments are not returned to investors. The only money that goes into the scheme is from new investors, so if the operator can no longer recruit new people (or is caught), there is no more money, and the investors stop getting paid. Often, it is challenging to get the money back because the operator may have already spent the investors' money. There are a number of red flags that an investment may be a Ponzi scheme, including investments that are not registered with the SEC and do not meet an exception under SEC rules, very consistent returns, high returns that do not have any risk, brokers who are not registered with FINRA, and complicated strategies.

Negligence

Stockbroker Negligence and Misconduct

There is a mistaken belief among many, including some attorneys, that investors must demonstrate fraud in order to initiate a securities arbitration action against a stockbroker. This simply is not the case. This mistake may come from the requirements placed on class action securities law suits, which must allege that some fraud has taken place.

We all have a duty not to act in a negligent manner. This duty also relates to financial firms, stockbrokers and other advisors who can similarly be held liable for their negligent actions or omissions.

Many investors fail to file claims against financial advisors, stockbrokers or firms because they do not want to accuse that person or firm of fraud out of fear that it would somehow tarnish the broker or firm’s reputation. However, few of us would not seek recovery for our losses if a driver negligently damaged our automobile. Why should we draw a distinction?

We should all be responsible for our negligent actions or omissions. If negligence by a stockbroker or firm resulted in loses to an investor, then the stockbroker or firm should be responsible to the investor for those losses. Negligence is not the cause of all losses. It may be prudent, however, to seek legal consultation to determine if your losses were the result of negligence.

Stock Fraud Arbitration Process

Explore the Full 10-Step Process

Free Case Evaluation

Our experienced securities attorneys will discuss the strengths and weaknesses of your potential claim during a free intake call. During this call, we may ask potential clients to send us certain documentation regarding their claim, including account statements from the brokerage firm at issue. A normal intake call may last between 20 and 45 minutes depending on the complexity of your case.

Retention Work with Fitapelli Kurta

Once we have determined that we will pursue your case and that you are willing to retain Fitapelli Kurta, we will send you our form retainer agreement. This agreement will explain your rights as our client and will detail our contingency fee structure. Under the terms of the agreement, you are not responsible for any attorneys fees to Fitapelli Kurta if the firm does not collect anything on your behalf.

Statement of Claim

Our first step in arbitration will be to draft the statement of claim. In arbitration, a document called a Statement of Claim is filed with the Financial Industry Regulatory Authority, or FINRA. This document is similar to a Complaint filed in court. The statement of claim will contain the basic facts of your case, our theory of liability and our monetary demand on the broker dealer.

Arbitrators Selection

Once your Statement of Claim is filed, both parties rank a list of arbitrators compiled by FINRA. These arbitrators will serve as both judge and jury for your case. During this phase, we will review resumes and prior awards from the pool of arbitrators that were randomly selected by FINRA. Similar to selecting a jury, both sides will have the right to automatically strike certain arbitrators. The remaining arbitrators will be listed in order of preference and submitted to FINRA as our final selection.

Initial Pre-Hearing Conference Call

The IPHC, or initial pre-hearing conference call, is a scheduling call between the attorneys and the appointed arbitration panel where hearing dates and deadlines will be established. The IPHC is typically held three months after the Statement of Claim is filed. FINRA typically selects hearing dates approximately nine months from the IPHC, allowing for a case to be fully adjudicated in 12 to 15 months; however some cases are adjudicated faster or slower depending on various factors.

Discovery

In arbitration, the parties are required to provide each other with certain documents necessary for the prosecution and defense of a case. As a claimant, you will be required to produce your tax returns, account statements and correspondence with the broker dealer. Once your Statement of Claim is filed, we will work with you to gather these documents. Please refer here for our discovery guide, which lists in detail all documents that need to be produced by a claimant.

Motion Practice

Although not required, the FINRA rules permit the parties to engage in limited motion practice. When a party files a motion, they are formally asking the arbitration panel to issue an order. The most common types of motions that are filed in FINRA are motions to compel discovery where one party fails to or refuses to voluntarily cooperate with discovery, as required by the rules.

Mediation/Settlement

As with most court actions, it is often in the parties collective interests to attempt to resolve a case amicably without the need for a formal adjudication by the Arbitration Panel. In our experience, there is usually a joint effort by both parties prior to an arbitration hearing to attempt to amicably resolve a case to avoid the cost and inconvenience of a hearing and the uncertainty of the result.

Pre-Hearing

Assuming your case has not settled, the pre-hearing phase is where we work with you and other witnesses to prepare for the arbitration hearing, which is very similar to a trial. We will also prepare all of the other components you will need to win your case including exhibits and draft a pre-hearing brief for the arbitration panel, identifying and summarizing key legal issues in your case.

Hearing / Award

An arbitration hearing is very similar to a trial, however, unlike a trial where there is typically a judge and a jury, the jury and judge of an arbitration hearing is the arbitration panel. The hearing will usually be located near where you lived during the time the dispute arose. Most hearings will last between three and five days, but more complex hearings may take several weeks. Within thirty days of the conclusion of the hearing, the arbitration panel will render its award. The parties then have thirty days to comply with the award.