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Family Investment Fraud

Investment fraud within a family is a growing business, and, in many cases, is orchestrated by family members taking advantage of siblings, spouses, parents, grandparents or other relatives.

In a number of these cases, the fraud itself involves a family member who illegally gets access to another family member's IRA or brokerage account and then subsequently makes unauthorized withdrawals or transactions. When this happens, the brokerage firm and the broker overseeing the account could potentially be legally responsible for some or all of the financial losses that the victim incurs.

Recently, Maddox Hargett & Caruso, P.C. represented an investor who brought a claim against Merrill Lynch, Pierce, Fenner & Smith, Inc. for unauthorized withdrawals and transactions made by a spouse on his Merrill Lynch IRA account. An Indiana arbitration panel of the Financial Industry Regulatory Authority (FINRA) later ruled against Merrill Lynch and awarded the investor who brought the claim more than $2.5 million in damages.

This particular case offers insight on the concept of fiduciary duty and the responsibilities that brokers and investment firms must provide to their clients. A broker's fiduciary duty is certainly breached if unauthorized transactions or withdrawals are made on a client's account.

Unfortunately, cases of financial fraud involving family members who make unauthorized transactions or withdrawals from another family member's IRA or brokerage account are not uncommon. What investors need to remember is that along with the perpetrator of the activity, the investment firm and/or broker may be legally responsible, as well.

If you've suffered investment losses due to unauthorized withdrawals or transactions made in your account by a family member, please contact us.

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