Lincoln Financial Advisors Investment Losses: What Investors Should Know
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Financial mismanagement and broker fraud can translate into significant losses for investors. When brokers engage in unauthorized trading, unsuitable investment recommendations, misrepresentations and omissions of fact, or other misconduct, investors may not know where to turn.
For some investors, FINRA arbitration is the next step. Arbitration allows investors to present their evidence to a panel of neutral arbitrators and results in a legally binding decision. Investment fraud attorneys are not limited to operating in specific states, and can help investors across the country pursue Lincoln Financial Advisors investment fraud claims.
Lincoln Financial Advisors is part of the Lincoln Financial Group family of companies. Investors may work with brokers through broker-dealer affiliate Lincoln Financial Distributors and purchase products offered by Lincoln Financial’s insurance subsidiaries. Working with a securities fraud attorney can ensure that you file your claim against the correct entity.
What Is Lincoln Financial Advisors Broker Fraud?
Broker fraud is a term broadly used to refer to misconduct that violates securities regulations, such as FINRA Rules, SEC regulations, and state securities laws.
Stockbroker fraud attorneys frequently see cases of broker misconduct involving:
- Unsuitable investment recommendations
- Unauthorized trading
- Overconcentration
- Misrepresentations and omissions of material facts
- Excessive trading
- Failure to supervise under FINRA Rule 3110
A structured case review by an investment fraud lawyer can uncover evidence to support your broker fraud claim. Investors may recover damages through FINRA arbitration or by settling their claim with Lincoln Financial Advisors. Past arbitrations or settlements with other investors do not indicate liability on the part of Lincoln Financial Advisors.
Investors who suspect broker fraud should reach out to Kurta Law for a free case evaluation.
John Kurta was totally successful at winning a complete settlement for us, obtaining our principle plus interest as well as having the Brokerage House we sued pay all attorney fees. Very professional and knowledgeable in all aspects of law. Very easy to talk to and very sensitive to client's needs. Highly recommend using his services!- Lou Maiolo
Has Lincoln Financial Advisors Been Accused of Broker Fraud?
Investors have filed claims against Lincoln Financial Advisors and its representatives. The firm and its Lincoln Financial Group affiliates have also been the subject of regulatory actions by FINRA and the SEC.
Investors should be aware that past arbitrations and settlements are not an admission of liability on the part of Lincoln Financial Advisors.
Lincoln Financial Advisors Churning Allegations
Under FINRA Rule 2111, brokers must consider whether the transactions they recommend align with their investor’s goals. This applies to both individual trades and patterns of trading.
Churning an account is always unsuitable because it generates excessive trading fees and broker commissions that can seriously reduce an investor’s profits. In some cases, these costs can completely overtake the client’s profits.
Investors can support churning claims using several important metrics:
- High cost-to-equity ratio
- High turnover rate
- Low average holding period
Turnover rate and average holding period describe how often investments are replaced by new assets. Cost-to-equity ratio measures how much an investor’s portfolio would need to grow in value to cover the costs of trading.
Firms must monitor clients’ accounts for signs of excessive trading and other misconduct, and failing to do so can implicate them in claims of broker fraud. We’ll get into Lincoln Financial Advisors’ supervisory obligations in a later section.
Unsuitable Recommendations & Lincoln Financial Advisor Fraud
Unsuitable investment recommendations violate FINRA Rule 2111, which requires brokers to consult an investor’s profile when making recommendations.
Investors’ profiles describe key customer information, including:
- Age
- Income
- Net worth
- Investment experience
- Risk tolerance
- Time horizon
- Liquidity needs
Whether an investment is unsuitable depends on the specifics of an investor’s financial situation. Some common examples of unsuitable investments include:
- Excessively risky investments
- Illiquid investments that are hard to sell
- Costly investments with high fees and unfavorable tax implications
- Products too complex for investor’s experience
- Aggressive recommendations of margin trading
Brokers may engage in multiple forms of misconduct simultaneously. For example, unethical brokers may make unauthorized trades involving unsuitable recommendations, recommend fraudulent investments, or misrepresent an investment’s fees and risks.
What is the Best Interest Obligation?
In addition to complying with FINRA Rules, brokers need to comply with SEC regulations. Regulation Best Interest requires brokers to conduct due diligence on investments before recommending them to investors. Brokers must understand how an investment works, as well as its fees, risks, and potential returns.
A lack of due diligence, whether on the part of the broker or the firm, can lead to losses for the investor. Investors may only need to prove negligence in some cases.
Lincoln Financial Advisors Unauthorized Trading Claims
FINRA Rule 3260 defines the requirements for approving discretionary accounts. Both the client and firm must provide authorization before an account can be discretionary.
This process ensures that discretionary trading only occurs in approved accounts. In non-discretionary accounts, brokers need written approval from their client before executing trades.
Brokers engage in unauthorized trading when they:
- Execute trades without risk discussions
- Execute trades when the client is not available for approval
- Make material alterations to an investment strategy without authorization
- Seek authorization after executing trades
For more information on how investors can pursue recovery in these claims, see our Lincoln Financial Advisors unauthorized trading page.
Lincoln Financial Advisors Misrepresentation & Omission Claims
When brokers misrepresent or omit important facts related to investments, they violate FINRA Rule 2020. This rule prohibits the deception or manipulation of investors.
Allegations of misrepresentation or omission often go hand-in-hand with claims of forgery, fabrication of documents, and other tactics unscrupulous brokers may use to mislead their clients.
Brokers may misrepresent or omit material facts such as:
- Risk associated with investment
- Fees, interest, tax implications, and other costs
- Broker conflicts of interest in a transaction
- Surrender charges, withdrawal limits, and other investment terms
- Investment value and expected performance
- Liquidity and available markets
Firms supervisory systems typically involve monitoring broker-client communications, and failure to identify signs of misconduct can lead to firm liability. We’ll discuss the role of supervision in Lincoln Financial Advisors broker fraud investigations down below.
Overconcentration & “Lincoln Financial Advisors Scam” Allegations
FINRA Rule 2111 prohibits overconcentration because it exposes the investors to an excessive degree of risk. Diversification is crucial to avoiding significant and unnecessary losses due to market volatility.
When evaluating overconcentration claims, arbitrators will consider the following:
- Risk disclosures
- Strategy and diversification discussions
- Investor sophistication and financial goals
- Degree of asset concentration compared to portfolio
- Timeline of how concentration occurred
While it isn’t a legal term, frustrated investors sometimes term the circumstances of their losses a “Lincoln Financial Advisors scam.” Arbitration panels will look at how your portfolio became concentrated and whether your broker engaged in other misconduct like misrepresenting the risk of concentration.
Failure to Supervise Under FINRA Rule 3110
FINRA Rule 3110 allows investors to make claims of firm liability in their allegations of broker fraud. It establishes three core supervisory responsibilities for brokerage firms:
- Establish systems of supervision designed to reasonably detect signs of misconduct
- Enforce these systems effectively and respond to red flags appropriately
- Ensure that supervisory personnel have sufficient training and experience
Investors can support claims of failure to supervise by establishing that the broker was under firm jurisdiction during the period of alleged misconduct.
Crucially, investors do not need to prove that Lincoln Financial Advisors or its representatives had an intent to cause harm. Negligent failure to supervise qualifies as a violation of FINRA Rule 3110.
Firms monitor for common red flags such as:
- High trading fees and broker commissions compared to account value
- Rapid high-volume trading
- Suspicious asset and money transfers
- Repeated customer complaints
- Aggressive margin recommendations
Lincoln Financial Advisors broker fraud investigations look for signs of supervisory failures in account documentation, such as trading records and broker-client communications. Investment fraud lawyers use their knowledge of securities regulations to evaluate claims of failure to supervise and determine your options for recovery.
What Investors Can Expect from FINRA Arbitration
Typically, investors agree to pursue their claims through FINRA arbitration when they sign their account opening agreements. FINRA arbitration typically resolves claims in 12 to 18 months, making it generally quicker than a civil court proceeding.
FINRA arbitration also differs from civil court in other important ways:
- No jury
- Results in a legally enforceable agreement
- Panel of neutral arbitrators decide case
- Comparatively limited discovery
- Very limited appeals
For a closer look at what you can expect from your case, see our page on Lincoln Financial Advisors arbitrations.
After your hearing, the arbitration panel issues an award. Arbitration awards are legally binding and enforceable agreements. You can access public arbitration awards through the FINRA Arbitration Awards Database.
How Lincoln Financial Advisors Arbitrations Work
The exact length of arbitration will depend on the complexity of your claim, but most cases reach resolution in 12 to 18 months.
The FINRA arbitration process follows the same structure each time:
Claim Filing: The first step is filing your Statement of Claim with FINRA Dispute Resolution Services. Your Statement should outline your allegations and the applicable FINRA Rules, as well as your requested remedy.
Firm Response: Lincoln Financial Advisors and your broker will file an Answer addressing your allegations and outlining their defenses. Firms generally file a response within 45 days of claim filing.
Arbitrator Selection: Next, each party will select either one or three arbitrators from FINRA-provided lists. This process typically takes about 1-2 months.
Document Exchange: During this process, you and the firm will exchange documents relevant to your case, such as trade confirmations, firm supervisory materials, and texts or emails from your broker. Discovery can take about 6-9 months.
Hearing: Unless you resolve your claim through settlement, your case will go to hearing. Both sides have the opportunity to present evidence and make use of testimony from expert witnesses. Hearings are typically scheduled 12-18 months after claim filing.
Arbitration Award: Following your hearing, the arbitration panel will issue a decision. Arbitration awards are legally binding and enforceable. You will receive notification of your award within 30 days of the end of your hearing.
Investment fraud attorneys advocate for their clients during the arbitration process, from claim filing to resolution. Their knowledge of the securities industry and experience with arbitration puts investors on even ground with the firm.
Contact Kurta Law for a no-cost, confidential case evaluation and discussion of whether FINRA arbitration is the best path forward for your claim.
Common Firm Defenses in Arbitration
Lincoln Financial Advisors may try to defend itself against allegations by claiming that the investor:
- Understood and accepted the risks
- Lost money through their own mistakes
- Had appropriate sophistication and experience
- Authorized relevant transactions
In arbitration, stockbroker fraud attorneys will use your evidence to argue against the firms’ defenses and show how your broker’s conduct connects to your losses.
When Do Lincoln Financial Advisors Settlements Occur?
Lincoln Financial Advisors may extend a settlement offer during the arbitration process. Settlement offers often come during the discovery period, when firms learn more about the extent of your evidence.
Settlement offers may be influenced by:
- Strength of your supporting documentation
- Credibility of expert witnesses
- Potential firm liability under FINRA Rule 3110
- Possible negative press
Remember, settlement offers are not admissions of firm or broker liability. An investment fraud lawyer can evaluate your settlement offers and use your evidence to negotiate with Lincoln Financial Advisors.
Why Investors Choose Kurta Law
The stockbroker fraud attorneys at Kurta Law have assisted investors in pursuing claims of unauthorized trading, overconcentration, unsuitable investment recommendations, and other types of misconduct.
Here’s how Kurta Law advocates for your interests during arbitration:
Documenting Misconduct
Stockbroker fraud lawyers gather evidence to support your claim through a comprehensive account review, examining trading records, broker communications, investment marketing materials, and other crucial documents.
A thorough case evaluation is key to building a strong case in arbitration.
Persuasive Presentation of Evidence
During the hearing, your attorney will present your case to the arbitration panel. Securities fraud attorneys establish a narrative of broker misconduct by organizing your evidence into a logical timeline that illustrates how your losses relate directly to your broker’s actions.
Your attorney can also make use of expert witnesses and exhibits to provide context to your arguments.
Identifying Supervisory Failures
The securities fraud attorneys at Kurta Law can identify supervisory failures that may implicate Lincoln Financial Advisors in your claims of misconduct.
Allegations of failure to supervise can be supported by firm supervisory materials, as well as testimony by expert witnesses who can provide analysis for the arbitration panel.
Settlement Offer Negotiations
Lincoln Financial Advisors may make settlement offers during any part of the arbitration process, including the hearing. Your attorney can evaluate your offer and negotiate with the firm using your evidence.
How Arbitrators Calculate Damages
Arbitration panels may use a combination of several damage models when deciding your award, including:
- Out-of-pocket losses
- Market-adjusted damages
- Broker commissions and trading fees
- Margin interest
- Benchmark performance
- Additional damages in special circumstances
Arbitration panels may take into account the costs associated with your broker’s recommendations, such as trading fees and margin interest, and how these expenses reduced your profits.
Market-adjusted damages and benchmarks both consider how your portfolio would have performed without mismanagement. Benchmark performance compares your portfolio’s performance with market indexes like the Dow Jones Industrial Average.
Time Limits Under FINRA Rule 12206
FINRA Rule 12206 requires investors to file their claims within six years of the beginning of the alleged misconduct.
While the rule allows for some exceptions, it’s vital for investors to speak to a stockbroker fraud lawyer as soon as they suspect broker fraud. It’s not always easy to identify exactly when misconduct began, so it’s best to seek out a case evaluation as soon as possible.
Frequently Asked Questions About Lincoln Financial Advisors Broker Fraud
Click each question below to expand the answer.
Can I sue Lincoln Financial Advisors for broker fraud?
Brokerage firm account opening agreements typically require investors to seek resolution through FINRA arbitration. This process results in a binding and enforceable agreement between parties, but is generally a quicker path to recovery than a civil proceeding.
What is the first step in evaluating a Lincoln Financial Advisors broker fraud claim?
If you believe your losses indicate broker fraud, your first step is to seek out a securities fraud attorney for a structured case evaluation. Your attorney will examine records such as account opening documents, trade confirmations, and broker communications for red flags of broker misconduct.
What qualifies as Lincoln Financial Advisors advisor fraud?
Lincoln Financial Advisors advisor fraud claims may involve allegations of unsuitable investment recommendations, misrepresentations and omissions of material fact, unauthorized trading, or other forms of misconduct.
What is churning?
Churning, also known as excessive trading, occurs when a broker engages in high volume trading. It generates high trading fees and commissions that can significantly reduce your profits.
What is unauthorized trading?
Unauthorized trading is an exercise of trading discretion outside what an investor approved. You may have a case for unauthorized trading even if your account is discretionary.
What is failure to supervise?
Firms may be held liable for failure to supervise if investigators find that they failed to comply with FINRA Rule 3110, which requires firms to establish and enforce adequate supervisory procedures to prevent broker misconduct.
Does Lincoln Financial Advisors have responsibility if a broker acted alone?
In some cases, Lincoln Financial Advisors may be found liable for the misconduct of its representatives. Arbitration panels consider the firm’s supervisory procedures and how it responded to signs of broker fraud.
What if I signed paperwork I didn’t fully understand?
Even if you signed paperwork, you may still have a case. Investment fraud attorneys can review account opening documents, supervisory materials, investment prospectuses, and other supporting documentation for red flags of broker fraud.
Can I bring a claim if my account was discretionary?
You may still have a case even if your account is discretionary. For example, excessive trading in discretionary accounts is prohibited by FINRA Rule 3260.
What if Lincoln Financial Advisors argues that market volatility caused the losses?
Market volatility is a common firm defense in arbitration, but arbitrators will look at the full context of your losses when evaluating broker fraud claims. This includes analysis of your risk tolerance, strategy discussions, monthly account statements, and other information.
Has Lincoln Financial Advisors settled investor claims?
Some Lincoln Financial Advisors broker fraud claims have been resolved through settlement. You can review recent complaints on our blog lincoln-financial-advisors-complaints or settlements in the FINRA Award Database.
What is a Lincoln Financial Advisors settlement?
A Lincoln Financial Advisors settlement is one of several possible resolutions to a misconduct claim. A stockbroker fraud lawyer can help negotiate an appropriate settlement with the firm. However, settlement offers made to other investors do not indicate firm liability.
How long does FINRA arbitration take?
FINRA arbitration generally resolves claims in 12 to 18 months, making it an overall faster process than a typical civil court proceeding.
How long do I have to file a complaint?
FINRA Rule 12206 requires investors to file claims within six years of the start of alleged misconduct. It’s crucial that investors seek out a stockbroker fraud lawyer as soon as they suspect broker fraud.
What evidence strengthens an investment claim?
You can strengthen your broker fraud claim with consistent documentation, including account statements, investor profile information, and firm supervisory materials.
What damages may be recovered from broker fraud?
Arbitration panels may award out-of-pocket losses, interest, and additional damages in special circumstances.
Does calling something a Lincoln Financial Advisors scam mean fraud occurred?
The phrase “Lincoln Financial Advisors scam” may be used as shorthand for broker misconduct, but this is not a legal term. Evaluating claims of broker fraud requires knowledge of securities regulations and financial industry standards of conduct.
Contact Kurta Law
If you have concerns about your broker’s conduct, reach out to Kurta Law today. Our securities fraud attorneys have handled cases involving a wide array of investment vehicles. Our history of achieving financial recovery speaks to our dedication to helping investors recover from financial mismanagement.