Spousal Investment Fraud
Earlier this month, an arbitration panel of the Financial Industry Regulatory Authority (FINRA) announced a ruling regarding spousal investment fraud. The case involved a spouse who made unauthorized withdrawals from her spouse's IRA account.
The panel held Merrill Lynch, Pierce, Fenner & Smith, Inc., the brokerage firm in this particular case, liable for the unauthorized withdrawals made from the client's IRA account and awarded him more than $2.5 million in damages. The panel also held Merrill Lynch responsible for $7,200 in fees and costs associated with the arbitration hearings.
Maddox Hargett & Caruso, P.C. provided legal representation to the investor who brought the claim against Merrill Lynch.
The claim and the award bring to the forefront a growing issue in the investment fraud world: Spouses who essentially “steal” from their spouse's brokerage or IRA accounts and what can happen to the investment firms involved for neglecting their client fiduciary duties.
When it comes to investments and financial products, stockbrokers and investment firms are bound by a fiduciary responsibility or duty to their clients. This fiduciary duty means that stockbrokers are required to put the investing interests of clients first and foremost. They also are legally obligated to provide full disclosure and information about recommended investments and financial products.
In addition, brokers must exercise due diligence regarding any withdrawals or transactions that take place within a client's account. In most instances, stockbroker need a client's authorization before any trades or transactions can occur in his or account. The authorization requirement can be waived if a client gives the stockbroker authorization in writing.
Investment firms also have a duty to uphold their supervisory responsibilities. Specifically, every brokerage firm has a duty to supervise the brokers who are licensed by that firm. If unauthorized transactions or withdrawals are made from a client's account, the investment firm and the broker overseeing the client's account could be in violation of their supervisory duties.
If a stockbroker fails to abide by this criterion and makes unsuitable trades without your prior consent or authorization, you could have a possible claim for unauthorized trading. For a free initial consultation regarding your securities claim, please contact us.