Why do so few investors file claims to recover investment loss?

If your financial advisor recommended that you invest in a Ponzi scheme and you suffered losses as a result, you may have grounds to sue them . Financial advisors have a legal duty to act in their client’s best interests and to recommend investments that are suitable for their client’s financial goals, risk tolerance, and other relevant factors. If a financial advisor recommends an investment that turns out to be a Ponzi scheme and causes their client to suffer financial losses, the advisor may have breached their duty of care to the client.

Can I Get My Money Back from a Ponzi Scheme?

There is a long list of reasons investors may not seek recovery when they have suffered losses. They are too embarrassed to admit they misplaced trust in a dishonest financial professional. They think the loss is their fault and chalk it up to the inherent risks of investing when an actually a broker is to blame. The investment was too complicated. They didn’t understand it to begin with, so they don’t fully understand their losses. They haven’t followed their investments closely enough to notice, don’t understand their statement or the losses were concealed by the broker or firm. Advisors often discourage investors from filing complaints, telling customers the losses are only temporary. Don’t let these misconceptions stop you from filing a claim. An investment loss attorney is well equipped to help you research your options and file a claim. It’s okay to ask for help to determine if your loss is recoverable.

How Can an Investment Loss Attorney Can Help Me?

If you suffered serious investment losses, you should consult with an attorney immediately. The legal options available to you will depend on many different factors. Your attorney must conduct a comprehensive investigation into your individual case. Some of the key issues that your lawyer will review include: The financial documents and records that you have in your possession; Your relationship with your financial advisor or brokerage firm; The promises that were made to you and your family; and The total losses you sustained due to the possible fraud/negligence. With full information in hand, your attorney will be able to determine exactly what actions you need to take to make the most effective claim for full and fair financial compensation for your illegitimate investment losses.

Comprehensive Investment Loss Recovery: Reclaim Your Financial Future

Close-up of a businessperson's hands using a laptop while holding a pen, suggesting work or research in a professional setting.

Most people understand that investing comes with inherent risks. Investment loss recovery refers to the legal process of reclaiming funds lost due to issues like broker misconduct, unauthorized trading, Ponzi schemes, churning and over-concentration of investments. While these risks are part of the process, losses caused by fraud or negligence are often preventable. Investors should be aware of their rights and options for recovering losses, especially in cases involving broker misconduct.

Why You Need an Investment Loss Lawyer

Experiencing significant financial loss can leave you feeling vulnerable, but it’s important to know you’re not alone. Investment loss attorneys specialize in helping people like you recover what was wrongfully taken, guiding you through the legal process to reclaim what’s rightfully yours.

An investment loss attorney knows the ins and outs of investment law and can guide you through every step of the recovery process. Here’s how:

Leveling the Playing Field: Financial firms and brokers have legal teams to defend against claims. Without your own expert representation, you may not have the knowledge or resources to prove your case.
Expertise in Complex Financial Cases: Investment fraud and misconduct cases involve detailed regulations, such as FINRA rules, that most people are unfamiliar with. Lawyers specializing in investment loss know how to navigate these rules to help increase your chances of recovery.
Avoiding Costly Mistakes: Filing a claim or going through arbitration requires precision. Missing deadlines, filing incorrect paperwork or misunderstanding legal terms can result in lost opportunities for recovery. An attorney ensures everything is done correctly the first time.
No Upfront Costs: Many investment loss lawyers work on a contingency fee basis, meaning they don’t get paid unless you recover money. This minimizes your financial risk and provides expert legal representation without upfront costs.
Recovering More than You Think You Can: It’s easy to overlook some aspects of your case if you’re not familiar with financial law. An attorney knows how to identify all potential sources of recovery, including hidden fees, unauthorized trades or unsuitable investment advice that may have caused your losses.

You don’t need to go through this process alone. A lawyer can help you reclaim the funds that were wrongfully taken and give you the best chance of financial recovery.

Types of Investment Fraud That Can Lead to Loss

Investment fraud comes in a wide range of different forms. If you have been the victim of fraud or negligence, it is imperative that you seek guidance from an investor attorney who can review the specific circumstances of your individual case.

According to data from the Financial Industry Regulatory Authority (FINRA), some of the most common types of investment fraud are as follows:

Broker/Advisor Misconduct: Financial professionals may push high-commission investments that benefit them more than their clients. These recommendations often come with unnecessary risks and may not align with the investor’s financial goals or risk tolerance, ultimately leading to significant losses.
Unauthorized Trading: Brokers make trades without the investor’s permission, often hoping the trades go unnoticed. These unapproved transactions can result in serious financial losses, and investors typically only discover the issue when reviewing their account statements. This practice is illegal and a clear breach of trust between the broker and client.
Churning: This is a tactic brokers use to increase their commissions by making unnecessary trades. The more they trade, the more they earn, even if it hurts the investor. Churning often goes unnoticed until the investor sees their account full of transaction fees, with little to no profit or, worse, significant losses. It’s a clear sign the broker is prioritizing their own income over the investor’s success.
Sale of Structured Products (Structured Product Loss): These are complex financial products that are often marketed to retail investors as safe or high-yield. In reality, structured products are risky, and their details can be hard to understand. Brokers may not fully explain these risks or may gloss over key information, leading investors to believe they’re making a sound investment when they’re not. Losses can occur when these products underperform or when the market moves in unexpected ways.
Ponzi Schemes: These schemes lure investors by promising high returns with little risk. Early investors are paid with the money from newer investors, making it seem like the scheme is working. However, as the pool of new investors dries up, the scheme collapses, leaving many people with nothing. Ponzi schemes rely on the trust of investors and often prey on those looking for fast, easy profits.

Recovering Losses Due to the Sale of Structured Products

Structured products, such as structured notes, are financial instruments that combine different assets to offer potential returns. While they can sound appealing, these products often come with significant risks that aren’t always clear to retail investors. The complexity of structured products can leave you exposed to losses, especially if they weren’t properly explained or didn’t align with your financial goals.

Investment loss attorneys are experienced in handling cases where structured products were sold under misleading circumstances or where the risks weren’t adequately disclosed. They review how the sale was handled, identify any unsuitable recommendations and determine whether the product was appropriate for your portfolio.

A key factor in structured product loss recovery is principal protection, which refers to safeguarding your initial investment. If this protection wasn’t in place or wasn’t properly explained, you may have grounds for a recovery claim.

If you’ve suffered losses due to structured products, our team can help evaluate your situation and work to recover your investments.

Two professionals discussing legal documents, with one holding a pen and the other holding a book, alongside a gavel and scales of justice on the table.

Steps to Take If You’ve Suffered Investment Losses

If you find yourself in a situation where you have incurred investment losses as a result of broker misconduct, it’s important to take the following steps:

Review Your Account Statements: Carefully examine your statements to identify any discrepancies, unauthorized transactions or irregularities that contributed to your losses.
Investigate Your Broker’s Credentials Using FINRA Tools: FINRA offers tools like BrokerCheck, which allows you to investigate the background of your broker, including any disciplinary actions, fines or suspensions.
Consult with an Investment Fraud Lawyer: Seek out a reputable investment fraud lawyer to schedule a free consultation. During this consultation, you can explore your legal options and determine the best course of action to potentially recover your losses.

By taking these steps, you can protect yourself from further losses and start the process of recovering your investments.

Investment Loss Recovery on a Contingency Fee Basis

Investment loss recovery attorneys typically work on a contingency fee basis, meaning you won’t pay any fees unless they successfully recover your funds. This arrangement benefits individual investors by providing legal support without upfront costs.

The Role of FINRA in Protecting Investors

For investors, one of the most frustrating experiences is realizing that their losses could have been prevented if their broker had followed the rules. FINRA helps protect you by:

Monitoring Brokerage Firms and Advisors: FINRA oversees thousands of brokerage firms and registered representatives, ensuring they comply with strict regulations. They conduct routine inspections, investigate complaints and impose penalties on firms or brokers who violate industry rules. In 2020 alone, FINRA imposed $57 million in fines and secured $25.2 million in restitution for investors, holding firms accountable for their misconduct.
Providing Resources Like BrokerCheck: Through tools like BrokerCheck, FINRA enables you to review the background of brokers and advisors, including their credentials, disciplinary history and any past misconduct. This tool helps you make informed decisions about whom to trust with your investments.
Enforcing Investor Protections: FINRA enforces rules that require brokers to make suitable recommendations based on an investor’s financial goals, risk tolerance and investment objectives. If a broker engages in unethical practices, such as churning or unauthorized trading, FINRA has the authority to take action, helping to prevent further harm.
FINRA Arbitration for Resolving Disputes: If you’ve suffered investment losses due to broker misconduct, FINRA provides arbitration as an efficient way to resolve disputes and recover your losses without going through the lengthy court process. Arbitration is legally binding and is designed to offer a quicker resolution, often leading to compensation for wronged investors.

By enforcing industry rules and offering tools for dispute resolution, FINRA serves as a critical ally for investors, helping to recover losses and maintain a fair and transparent financial system.

Two professionals sitting at a table during a business meeting, with charts, scales of justice, and a gavel visible on the desk.

Notable Success Stories in Investment Loss Recovery

$4 Million → Award for Client of JP Morgan Broker Edward L. Turley

In December of 2021, we helped secure a $4,000,000 award for our client – Lacey Winston Keath – who was a victim of unauthorized trading of unsuitable securities, including high-risk equities and junk bonds, by ex-JP Morgan broker Edward L. Turley.

Learn more about this recovery.

$11.1 Million → Verdict against Smith Barney broker who sold away in violation of FINRA rules

The firm obtained a verdict of over $11.1 million, which included all the principal losses, plus ordered the bank to indemnify the claimants for a $10 million state court judgment entered against them for investors who sustained losses in a failed real estate development recommended by their Smith Barney broker who sold away in violation of FINRA rules and industry rules.

Brokers are prohibited from recommending investments that are not approved by their brokerage firm, an illicit practice called “selling away.” The recovery represents 100% of the investors’ losses. The award is notable in that the arbitrators made Smith Barney liable for the amount the investors owed Wachovia Bank under a $10 million dollar final judgment against the investors who were guarantors of a loan made in connection with the failed development.

View the award.

$1.1 MILLION → Verdict against Morgan Keegan for securities fraud

Cobb vs. Morgan Keegan & Co. (FINRA). The Firm obtained a $1.1 million dollar verdict against Morgan Keegan in a case alleging securities fraud over the sale of Morgan Keegan closed-end and open-end mutual funds, known as RMK Mult-Sector High Income Fund (RHY), RMK Advantage Income Fund (RMA), RMK Select High Income (MKHIX), RMK High Income Fund (RMH), RMK Strategic Income Fund (RSF). The verdict and subsequent recovery amounted to 80% of the investor’s net losses.

View the award.

The Investment Loss Attorneys at Sonn Law Group Can Help

At Sonn Law Group, our investment loss lawyers have extensive experience representing clients who have experienced losses related to stockbroker misconduct and investment fraud. Contact us for a free case review. We will determine if you have a reasonable claim and help you decide how to proceed.

DISCLAIMER: This article contains opinions and not statements of fact in any way whatsoever. The information here is general information that should not be taken as legal advice. No attorney-client relationship is established between you and our attorneys by reading this article. This article is attorney advertising and should not be used as a substitute for legal advice from a qualified lawyer.