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Representing Individual, High Net Worth & Institutional Investors

Office in Indiana


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Siblings Stealing Investments

Financial scams and fraud are especially prevalent against the elderly. Oftentimes, the culprit is a family member: siblings and the victims' own children.

A 2006 survey by the North American Securities Administrators Association (NASAA) shows that senior investment fraud accounts for nearly 50% of all complaints received by state securities regulators. That number is up from the 2005 survey, when 28% percent of fraud reports involved the elderly.

In some instances, the fraud involves family members who misappropriate another family member's investments or make unauthorized withdrawals from the victim's IRA or brokerage account. In addition to the person committing this fraud, the brokerage firm and the broker could be held liable for any unauthorized activity that occurs.

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. Ultimately, an Indiana Financial Industry Regulatory Authority (FINRA) arbitration panel ruled against Merrill Lynch and awarded the investor more than $2.5 million.

The award reiterates the fact that brokers and investment firms have a fiduciary duty to their clients. Any transactions or withdrawals made on a client's account must be authorized by the client. If certain procedures are not adhered to, as in the Merrill Lynch case, both the investment firm and the broker overseeing the client's account could be in violation of their fiduciary and supervisory duties.

The bottom line: Investment scams take many shapes and forms and can involve anyone. That includes a sibling, a spouse and other family members. In cases involving unauthorized transactions or withdrawals from an IRA or brokerage account, liability rests not only with the perpetrator of the crime but also with the client's investment firm and/or broker.

If you have a story that relates to unauthorized withdrawals or transactions made in your account by a family member, please contact us.

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