Can I Sue My Financial Advisor? Understanding Your Legal Rights After Investment Losses

If your investment accounts are shrinking, your advisor has gone quiet, or your portfolio feels like a ship sailing without a compass, you may be asking a critical question: Can I sue my financial advisor?

Yes, under the right circumstances. Investment losses alone are not grounds for a claim—markets rise and fall. However, when losses stem from negligence, unsuitable recommendations, misconduct, or violations of industry rules, investors may have the right to pursue financial recovery through FINRA arbitration or litigation.

At Sonn Law Group, we represent investors nationwide who have suffered losses due to broker misconduct, unsuitable investment strategies, excessive trading, and breaches of fiduciary duty.

When Can You Sue a Financial Advisor?

Not every loss is actionable. But legal claims may arise when a financial professional violates regulatory duties or places their interests ahead of yours.

Common grounds for claims include:

• Unsuitable investment recommendations
• Breach of fiduciary duty or violation of Regulation Best Interest (Reg BI)
• Failure to diversify or over-concentration
• Excessive trading (churning)
• Unauthorized trades or selling away
• Misrepresentation or omission of material facts (including risks or conflicts)
• Failure to conduct proper due diligence
• Negligent supervision by the brokerage firm
• Failure to disclose conflicts of interest

When misconduct drives losses, investors may be entitled to recover damages.

The Legal Duties Financial Advisors Owe Investors

Financial advisors operating under FINRA rules must follow strict standards designed to protect investors.

Suitability Obligation (FINRA Rule 2111) Advisors must recommend investments consistent with a client’s:

• Age and financial condition
• Risk tolerance
• Investment objectives
• Time horizon and liquidity needs
• Tax status and experience

If an investment does not align with your profile, it may be considered unsuitable and legally actionable.

Fiduciary Duty vs. Suitability Some advisors, particularly Registered Investment Advisors (RIAs), are fiduciaries and must act in your best interest at all times. Brokers (broker-dealers) are subject to FINRA Rule 2111 (suitability) and the SEC’s Regulation Best Interest (Reg BI), which requires them to act in the retail customer’s best interest when making recommendations, including disclosing and mitigating conflicts. Both standards can create liability when violated—Reg BI provides stronger protections than pure suitability for brokers.

Types of Suitability Violations FINRA recognizes three key categories:

• Reasonable Basis Suitability — Advisors must understand an investment before recommending it. Failure to investigate risks, structure, or legitimacy may create liability.
• Quantitative Suitability — Even suitable investments can become unsuitable when traded excessively. Churning designed to generate commissions is illegal.
• Customer-Specific Suitability — Recommendations must match your unique financial profile. Age, risk tolerance, and liquidity needs must always be considered.

Warning Signs of Financial Advisor Misconduct

Red flags often appear before major losses occur:

• You cannot reach your advisor
• Unexpected or unexplained trades appear
• Portfolio risk suddenly increases
• Heavy concentration in one sector, product, or high-risk/illiquid investments
• Frequent trading generating high fees or commissions
• Promises of “safe,” “guaranteed,” or unusually high returns
• Advisor recommends complex or alternative products without clear justification
• Advisor has prior complaints or disciplinary history

These signals may indicate negligence, misconduct, or fraud.

How FINRA Protects Investors

The Financial Industry Regulatory Authority (FINRA) regulates brokerage firms and advisors. When rules are violated, investors typically pursue recovery through FINRA arbitration, a specialized legal forum for securities disputes.

Investors may recover losses caused by:

• Unsuitable recommendations
• Negligence
• Failure to supervise
• Misrepresentation
• Fraud

Brokerage firms can also be held liable for failing to properly supervise advisors.

Steps to Take If You Suspect Misconduct

If you believe your advisor acted improperly:

1. Gather account statements, emails, and communications
2. Document unexplained losses or suspicious activity
3. Check your advisor’s record on FINRA BrokerCheck
4. Submit a written complaint to the firm
5. Consult a securities fraud attorney experienced in FINRA arbitration

Time is critical—FINRA imposes a six-year eligibility period for most claims (from the date of the events or when they reasonably should have been discovered). Acting quickly preserves evidence and strengthens your case.

Can You Recover Investment Losses?

Yes. Many investor claims succeed when losses result from misconduct rather than normal market forces. Recovery may include:

• Investment losses
• Excessive fees and commissions
• Interest and damages
• In some cases, punitive damages

Each case depends on facts, documentation, and regulatory violations.

How Sonn Law Group Helps Investors

Sonn Law Group represents investors nationwide in securities fraud, broker misconduct, and FINRA arbitration claims. Our attorneys investigate advisor conduct, analyze account activity, and pursue recovery from both the broker and the brokerage firm when violations occur.

We assist clients with:

• Case evaluation and claim analysis
• Investigation of advisor misconduct
• FINRA arbitration representation
• Recovery strategy and documentation
• Protecting future investments

Our attorneys have successfully recovered millions for investors in unsuitable investments, churning, and fraud cases.

If you believe your financial advisor violated their duties, legal options may be available.

Speak With an Investment Fraud Attorney

If your portfolio losses may be linked to negligence, unsuitable investment advice, or misconduct, you do not have to navigate the process alone. Understanding your rights is the first step toward recovery.

Sonn Law Group offers confidential, no-obligation case evaluations for investors seeking answers and potential recovery options.

Don’t let time run out on your potential recovery. Contact Sonn Law Group today for a free, confidential review—no recovery, no fee.