The U.S. Securities and Exchange Commission has consistently made it clear that brokerage firms and the stock brokers they employ cannot recommend the purchase of a particular stock unless they have a reasonable basis for making that recommendation.  And, generally speaking, a reasonable basis will stem from a due diligence, reasonable investigation examination and analysis of the features and characteristics of the underlying stock.  In other words, a reasonable investigation will usually serve as a predicate to the formation of a reasonable basis for a stock recommendation.  Indeed, the duty to make a reasonable investigation of a security before making representations relating thereto is so basic — and so essential — that this principle can scarcely be questioned.  In colloquial terms, this fundamental concept is often referred to as the “know your security” rule — which is a corollary to the “know your customer” requirement.  Briefly stated, the know your customer rule requires financial advisers to customize and tailor recommendations toward the specific attributes of the customer, such as investment objective, risk tolerance, investment experience, income, net worth, age, etc.  Suffice to say, stock brokers who do not maintain a detailed understanding of these customer attributes cannot satisfy their know your customer obligations.  In sum, financial advisers are urged to “roll up their sleeves” and get to know their customers on an in-depth basis.  If they decline to do so, they will obviously face liability for the inadequacies and shortcomings they maintain in that area.

The importance of trust cannot be overstated.  Trust not only serves as the cornerstone of the financial markets, it is the lifeblood of broker-customer relationships.  It is absolutely crucial for brokers to act in accordance with the trust that has been placed in them.  Brokers who make misrepresentations to their clients abuse that trust — the very same trust that has been so ardently cultivated.  Significantly, misrepresentations do not arise solely in a situation where a broker voices a knowing falsity.  Misrepresentations can also arise via the communication of a half-truth (a statement that is accompanied by a material omission).  As an additional matter, a misrepresentation can occur when a broker creates a bad faith, fictional portrayal, wherein he casts himself in a knowledgeable, authoritative light — and then proceeds to make optimistic, highly-positive statements that are devoid of a reasonable basis.  For example, suppose a broker seeks to capitalize on the (disingenuous, dishonest) authoritative aura he has constructed by assuring customers that XYZ Company is expected to grow by 20% per year for the next three years.  Simply put, if the broker lacks a reasonable basis for that representation, he may be held liable for customer losses.  Why?  Because a financial adviser who acts in reckless disregard for the truth or falsity of his statements essentially engages in a deceptive scheme that is designed to advance his own financial interests (via the receipt of commissions), to the detriment of his customers (who sustain the resulting financial losses).  Inasmuch as the accolades that were so persuasively showered on XYZ Company lacked a reasonable basis, they constituted misrepresentations.  Globally speaking, a financial consultant who carries out such a dishonest scheme not only destroys his relationship with the specific customers he has defrauded, he tarnishes the financial service industry as a whole — and thereby increases the cost of capital, in that, investors will demand higher returns if they perceive heightened risks.  Naturally, an increase in the cost of capital can have a negative impact on young, growing companies that are striving to raise money so as to open new offices and build new plants.  From a bottom line perspective, these considerations, taken as a whole, highlight the pivotal and indispensible role trust plays.  They likewise reveal the consequences that stem from an abuse of trust.

Layered on top of this framework is the recognition that some financial products are more complex — and more opaque — than conventional securities.  Needless to say, it will generally be especially difficult for most investors to gauge the actual level of risk that will accompany a securities transaction under these circumstances.  Propelled by an informational void, investors will be far more likely to place a stronger, more robust sense of reliance on financial advisers in this type of setting.  In the absence of customized, insightful, and truthful explanations, how would the average customer know whether it would be prudent to buy the security in question?  Clearly, these dynamics will ordinarily lead to a situation characterized by a heavy level of dependence on the financial professional.  (Note:  Faced with these circumstances, brokerage firms and brokers may attempt to put up a defense wherein they claim that they served as mere “order takers.”  In short, logic and common sense should operate so as to destroy such a defense argument, especially if the firm or the registered rep sold that same investment to a broad array of people.  In truth, it is doubtful that the customers would have ever become aware of the product if they had not been subjected to a sales pitch.)  In any event, it is of utmost importance that brokerage firms and their employees place the interests of their customers first while marketing investment securities that are difficult to understand.  If they abuse the informational advantage they maintain, it is only fair that they be held responsible for the losses that arise.  Fundamental fairness requires that those who abuse the trust they have created be held legally responsible for the losses that naturally flow from the persuasive sales presentations that were made.

For decades, financial fraud schemes have relied on the use of fictitious, bad faith marketing materials which discuss the features of the underlying financial product in a simplistic (but misleading) manner.  Generally speaking, the glossy, upbeat marketing documents will describe the investment in highly favorable terms.  Regrettably, however, those comforting, reassuring portrayals will usually be accompanied by segments of a Private Offering Memorandum (POM) which essentially suggest that there is little chance of success.  Skipping ahead, if losses are sustained and the case proceeds to trial, the defense team may seek to minimize — or disavow — the positive representations that were highlighted in the flashy marketing brochures, while simultaneously emphasizing the negative aspects of the Private Placement Memo (PPM).  Fortunately, securities industry regulators, together with state and federal courts, have found this tactic to be wholly unacceptable.  To that end, they have held that the use of negative, boilerplate language does not operate so as to “cure” fraudulent conduct, nor does it license a broker to make false representations to customers.  Moreover, FINRA (f/k/a NASD) has even specified that contradictory sales presentations may nullify fatalistic, boilerplate language featured within a PPM.

If you have sustained losses in the stock market based on the false statements of a financial adviser, you may be victim of securities fraud.  While no one relishes the thought of being deceived, it is comforting to know that important investor protection principles exist under state and federal law.  Consequently, it may be in your interest to contact a securities lawyer.  Chris Bebel is a leading investment fraud attorney who has represented numerous securities fraud victims situated throughout Texas — and the country.  Contact Chris Bebel, an accomplished, experienced securities law attorney who heads the investment fraud section of Tefteller Law, PLLC, a leading securities law firm.  Chris Bebel is a highly regarded investment fraud lawyer who has developed a record of success during the course of his career, which spans more than three decades.  Indeed, numerous attorneys practicing throughout the nation have called upon Chris Bebel for his knowledge, insights, and advice.  As an experienced trial lawyer, a former SEC attorney, a published scholar on securities fraud, and a former federal prosecutor who has made an array of presentations to licensed securities industry personnel, Chris Bebel’s knowledge extends well beyond the realm of the governing statutes.  He knows how brokers and the brokerage industry actually function on a daily basis; he also understands the tactics they employ, together with the shortcuts they take.  Unlike many other lawyers, he does not look upon stock broker fraud in elementary terms.  Indeed, his knowledge and understanding of securities industry compliance and supervisory standards will usually be far in excess of the broker’s appreciation for those principles.  Given the multitude of financial fraud cases he has handled over the years, he is viewed as a highly capable investment fraud attorney who utilizes his trial skills to capitalize on the knowledge and experience he maintains so as to build a stronger, more compelling case.  In doing so, he has repeatedly structured his cross-examination so as to devastate the testimony of financial fraud defendants and the expert witnesses who testify on their behalf.

Chris Bebel, a graduate of Georgetown Law School (LL.M., Securities Regulation) is a published securities law scholar who has made numerous securities fraud presentations at seminars, meetings, and classes that have been held across the country.  He works closely with Bradley Ellison, Master Sergeant, U.S. Air Force (Ret.).  Mr. Ellison is a talented, intellectual paralegal who has earned three graduate degrees.  As suggested by the success he has achieved in the academic realm, Mr. Ellison is a superb writer.  Over the years, Mr. Ellison has repeatedly put his writing skills to work by suggesting an array of editorial revisions and modifications.  But, at the end of the day, Mr. Ellison’s most significant attribute is the dedication and commitment he uniformly displays toward his work.  In recent years, Mr. Ellison has provided invaluable assistance in connection with an assortment of cases involving private offering fraud, which may also be referred to as private placement fraud.  Texas investors have benefitted greatly from his “can do” attitude; the same spirit he sought to distill in the troops he supervised and led.

Not surprisingly, neither Chris Bebel nor Bradley Ellison can offer any guaranty or promise of success.  Basic ethical standards do not allow for such a guaranty or promise; neither does logic or common sense.  Likewise, investors must understand that Mr. Bebel has rejected numerous cases that have been presented to him over the years.  A decision to accept or reject a given case will generally turn on an array of considerations.  No decision can be made with respect to acceptance or rejection without a detailed analysis.  No fees are charged for initial consultations.  Initial consultations are free.

If you have suffered a significant loss in the stock market, it is in your interest to speak with a securities litigation lawyer so as to obtain a better understanding of the potential rights and remedies that may lead to a recovery of investment losses.  In taking that step, however, be sure to proceed with caution.  The retention of an untested novice is likely to heighten the odds of disillusionment and disenchantment.  Speak with a knowledgeable, experienced securities fraud attorney who understands the intricacies of securities fraud.  Over the years, numerous attorneys have hired Chris Bebel for his knowledge and expertise.  Those engagements, operating in conjunction with the invaluable trial experience he gained while working as a federal prosecutor, make him uniquely qualified to combat stock broker fraud and investment adviser fraud.  To that end, Chris Bebel is a leading investment fraud lawyer with a long list of accomplishments.  During the course of his lengthy career, Mr. Bebel has repeatedly dismantled the testimony of securities fraud defendants and their expert witnesses.  Put Chris Bebel’s experience, skill, and expertise to work for you; reach out to him and explain the surrounding circumstances.  Even if he does not accept your case, he may nonetheless be able to provide you with valuable securities fraud insights.

Consistent with the foregoing, stock broker fraud can arise when representations are made in the absence of a reasonable basis.  If you have been subjected to financial adviser fraud, call Chris Bebel, a securities litigation attorney so many lawyers have called upon.  He will do his best to apprise you of the potential rights and remedies that are available.  There is a wide variance of skill, accomplishments, knowledge, expertise, and experience among securities lawyers.  Don’t settle for a novice securities law attorney.  Contact Chris Bebel, a leading securities lawyer who has repeatedly distinguished himself while building a track record of success.  Over the course of his career in private practice, Chris Bebel has repeatedly recovered financial losses pursuant to his legal representation of numerous Texas investors.  But, significantly, Texas investors are not alone.  Chris Bebel has also achieved very impressive results while representing investors on a national level.  If your trust has been abused by a dishonest financial adviser, reach out to a reputable, successful securities attorney.  Fraud has frequently triggered large monetary losses.  Do not stand idle.  Assert your rights.  Depending on the circumstances, there may be a need to act quickly.  Statutes of limitations and other time constraints may bar a recovery if a lawsuit is not promptly filed.  To speak with Chris Bebel, call Tefteller Law, PLLC, a respected securities law firm.