• Churning, also known as Excessive Trading, occurs when a broker executes an excessive number of trades on an account in order to earn the commissions paid on each trade.
• Unsuitability Trading and "Know Your Customer" Rules. Suitability rules in investing require that a broker make investment choices that they know are conducive to the needs of their client. Closely related are the "Know Your Customer" Rules, which require a broker to fully understand the wants and needs of their client. If your broker does not perform according to these rules, they are liable for your losses.
• Over-concentration occurs when the broker puts the majority of the client's investment into one area, rather than diversifying the client's portfolio, and then the value of the investment declines significantly.
• Unauthorized Trading/Failure to Execute Order. An investor must approve each trade before the trade takes place. It is unethical to execute trades without the consent of the client. It is also the broker's responsibility to execute trades in a timely fashion. If a broker executes a trade without your permission, or refuses or delays a sell order, you have a case for recovering your financial losses.
• Investment Misrepresentation or Fraud occurs when a broker misrepresents a stock to the client, or omits vital information in order to encourage them to purchase certain stock. Stockbrokers who purposely omit information with the purpose of misleading their client are as liable as those who give false information to their clients. A broker has the responsibility to disclose all risks of a stock. 
• Insider Trading/Front Running. It is against the rules and regulations of the securities industry to enter into any securities transactions while in possession of nonpublic information. If your broker does this, they are breaking the law.
• Touting is when a stockbroker misrepresents, or fails to disclose, material facts of a "house stock" that they are trying to sell to their client. If your broker performs in this way, they are liable to you for your financial losses.
  
  As an investor, you should be proactive, and always be aware of the actions your broker is taking when managing your account. There are several warning signs of fraud that you should look out for:
  • Inconsistency between the broker's verbal statements and the performance of the investments.
  • Misrepresentations about an investment; failing to disclose risks.
  • Excessive trading on the account.
  • Trading in high risk, speculative or unsuitable investments.
  • Trading in securities and strategies without first properly educating the client.
  • Trading without proper and prior authorization.
  • Trading in low value securities or obscure companies on foreign exchanges, or private investments.
  • Unresponsive to complaints by the client.
  • Repeated promises by a broker to make up for losses.
  • The loss of funds or value of an account that the broker cannot explain.

If you think that you may have been defrauded, you should take immediate action to protect yourself and your investments. First, stop all trading with your broker until your concerns are resolved. Second, write a letter of complaint to your broker and his supervisor, or request a meeting with the brokerage firm manager. And finally, consult with a qualified attorney and have the account documents reviewed to determine whether you have been the victim of securities fraud. Epperly & Follis, P.C will outline the documentation required, the decisions that must be made, and will continue to guide you through the legal process.