Securities Litigation
When people lose money in an investment, they frequently believe there is nothing they can do. They took a risk, lost, and that is life. Often that is true.
However, all too often brokers, brokerage firms and investment advisors victimize their clients. James, McElroy & Diehl has helped many such investors recover their losses or significantly reduce them. Certain lawyers at James, McElroy & Diehl, such as Fred B. Monroe, J. Mitchell Aberman, and Edward T. Hinson, Jr. have extensive experience applying the state and federal statutes and legal principles that provide for an investor to recover their losses. James, McElroy & Diehl has handled securities cases involving losses from a couple thousand dollars to hundreds of millions of dollars.
James, McElroy & Diehl maintains its objectivity in its review of investor claims because it also has extensive experience representing brokers who are accused of wrongful conduct or unjustifiably disciplined by their firms. James, McElroy & Diehl is familiar with the regulatory and disciplinary process of FINRA and the rules applicable to brokers and broker dealer firms. We have successfully represented brokers and broker-dealer firms in investigations and administrative disciplinary proceedings. James, McElroy & Diehl has also handled disputes relating to the employment contracts and separations of registered representatives from their employers.
James, McElroy & Diehl’s legal history of taking on investor cases provides it with a competitive advantage over other law firms in the Charlotte area who purport to offer the same services. For example, James, McElroy & Diehl handled the case that created the legal precedent in North and South Carolina for the recovery of punitive damages and attorneys’ fees where a violation of securities law had been committed in the federal decision of Hunt v. Miller, 908 F.2d 1210 (4th Cir. 1990). Having arbitrated, or tried multiple cases for investors, James, McElroy & Diehl’s lawyers know what it takes to successfully prosecute an investor’s case, and to defend frivolous claims brought against a broker, or a broker-dealer.
Almost all investor claims against a broker dealer are decided by arbitration before the Financial Industry Regulatory Authority, Inc. (“FINRA”). Certain James, McElroy & Diehl lawyers are intimately familiar with FINRA’s procedures and hearing process and are well suited to advocate for their clients in that forum
The most commonly referenced federal claim that is the basis for an investor’s recovery is section 10(b)(5) of the Exchange Act. A 10(b)5 claim allows an investor to recover where there was a misrepresentation (or material omission) during the purchase, or sale, of a security. Its state law counterpart is found in Chapter 78A of the North Carolina General Statutes. In cases where a misrepresentation has occurred in connection with the purchase or sale of a security, these statutes provide for the investor to recover an amount that will put him or her in the same position as if the investment had not been made. (This remedy is called rescission.) If the requirements are met, the investor can also potentially recover punitive damages and attorneys’ fees. There are certain types of investor claims for securities violations that are directly tied to the conduct of an investment advisor. Some of those include:
- Unsuitable investments
- Unauthorized trading
- Selling away
- Breach of fiduciary duty
- Negligence
- Churning/excessive trading
- Material misrepresentations or omissions
- Front running
- Misrepresentation of accredited investor status
- Non-conforming investment (NCI) abuse
- Illegal tenant in common (TIC) arrangements
- Theft of funds or securities
- Overconcentration of assets/failure to diversify
- Foreign exchange (Forex) trading fraud
- Annuity concentration or abuse
- Option fraud
One common misconception is that the investor can only recover if their advisor committed “fraud.” However, the standards for securities “fraud,” do not require that the advisor “intend” that the misrepresentation cause the investor to suffer harm. Rather, the standard is that there was a material misrepresentation to the investor. In addition, an investor may have a viable claim against advisors who fail to “know their customer,” which is a basic standard of conduct. Furthermore, an investment advisor must recommend only “suitable” investments. In determining whether an investment is “suitable,” a myriad of factors are considered, such as whether the stated investment objectives, or goals, of the investor are consistent with the actual investments recommended, whether there is diversification of risk among the securities purchased while also considering whether the investor’s disclosed assets, age, experience, and sophistication comport with the recommended investments, and whether non-conforming investments (NCI) were recommended.
James, McElroy & Diehl has extensive experience in representing clients who have been harmed by investing in non-conforming investment (NCI) such as prime bank notes and promissory notes. “Non-tradable REITS” are a recent NCI that has come to the attention of certain James, McElroy & Diehl lawyers. Other financial products that certain James, McElroy & Diehl lawyers have recently represented clients involved Auction Rate Securities (ARS), Lehman Principal Protected Notes, and certain private placement offerings. Certain James, McElroy & Diehl lawyers are also well equipped to represent clients in claims arising out an investment advisor’s (registered representative) and their firm’s failure to perform due diligence on such investments prior to recommending them to the investor.
