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What in an Investment Lawyer?

Securities Lawyer Jonathan Kurta
By: Jonathan Kurta Author

An investment lawyer specializes in the laws regulating the purchase and sale of securities. Investors usually seek out investment lawyers once they have suffered losses in their investment portfolio – losses that cannot be explained by normal fluctuations in the stock market. Investments lawyers may also be referred to as “securities attorneys” or “stock fraud lawyers.”

When an investor starts working with a broker or financial advisor, the investor communicates how much risk they are willing to accept. Many investors– especially investors planning for retirement–will lean toward conservative investments. Broker fraud and misconduct occur when the financial professional ignores their investor’s wishes or persuades them to invest in an unsuitably risky product through misrepresentation, omission of material facts, or negligence.

Why Do Investors Need Investment Lawyers?

Investors are frequently victims of securities fraud and broker misconduct. To help investors detect fraud, FINRA has published a helpful list of common broker misconduct red flags.

  • Brokers might guarantee high returns, something FINRA prohibits. Nothing is ever guaranteed in investing.
  • Unscrupulous brokers might also omit essential information about the stock, such as the tax consequences or fees associated with early withdrawal.
  • Brokers might recommend investments that are too risky for their investors’ needs. These investments are unsuitable

When Should I Contact an Investment Lawyer?

If you have experienced any of the following, you should review your account statements and speak to an investment lawyer if you have concerns regarding your losses.

  1. Abnormally regular returns. Normal investments fluctuate over time. Investors should question account statements that never indicate any fluctuation or minor losses.
  2. Sudden lack of communication. Brokers should respond to your questions in a professional and timely manner.
  3. Complicated strategies. You should always be able to understand how an investment works. The more complex an investment is, the more likely it is to be high-risk.
  4. No documentation. Investments should always come with a prospectus, an offering circular, or a Form D for unregistered offerings. If those documents are not available, steer clear.
  5. High-pressure sales tactics. Your broker should give you time to consider investments. Any pressure to “act now!” is a red flag.
  6. Unauthorized trading. If you see trades in your account that you did not authorize, contact an investment fraud lawyer immediately.

What is a Risky Investment?

Certain types of investments are more likely to appear in securities fraud cases. In general, investments that promise especially large returns are usually risky.

  • Non-Traded REITs. In 2021, Real Estate Investment Trusts (REITs) were the second-most common securities in investor disputes. Non-traded REITs are illiquid investments that cannot be bought and sold on a stock exchange, so they must be held to maturity (or potentially sold on a secondary market at a substantial discount).
  • Leveraged and/or Inverse Exchange Traded Funds. Leveraged ETFs use borrowed money to invest, which is always a risky move. Inverse ETFs attempt to profit based on speculation that an index or stock price will drop at some point in the future.
  • Futures. These investments speculate on the future price of a commodity.
  • Corporate Bonds. Unlike government-issued bonds, corporate bonds can easily lose money.
  • Mutual Funds. Mutual funds can be risky depending on their underlying investments. These funds also appear in investor disputes because of their fees. Investors are often entitled to discounts if they purchase more shares in a class of mutual funds they already own. If brokers do not inform investors of these discounts, they could become the subject of an investor dispute.
  • Energy Investments. Any investment involving oil drilling or exploration is extremely speculative and could easily lose money. Oil and gas are subject to extreme price fluctuations. Anyone buying an energy investment should be prepared to lose their entire investment.
  • Options Trading. Options trading is speculative and therefore risky. Many options investors will lose their entire investment.
  • Brokered Certificates of Deposit. Brokered CDs are issued by brokerage firms instead of by banks and have far greater potential for losses.
  • High-Yield Bonds, a.k.a. “Junk” Bonds. These are bonds that are not rated or have a low credit rating.
  • Penny Stocks. Penny stocks are low-priced stocks that trade for $5` or less. Investors have been persuaded to buy penny stocks with the promise of significant returns, but they are more likely to lose the investor’s money or to be the subject of fraud.

What is Investment Law?

There are other areas of investment law that do not specifically address investor concerns.

Investment law could refer to a variety of niche securities laws. In addition to securities laws and regulations, investment law may address questions like, “Does my cryptocurrency qualify as an investment?” These questions are typically addressed by the Securities and Exchange Commission and the Securities Act of 1933.

What Types of Investment Lawyers Are There?

Investment lawyers represent clients who do business in the securities industry. They may help write investment contracts and represent companies that issue securities.

Investment Management Fund Lawyers

Investment fund lawyers represent funds that require management, such as mutual funds. Fund managers implement the fund’s investing strategy in exchange for a management fee. Investment management law firms are typically working on behalf of funds, and not investors.

Legal Defense for Brokerage Firms

Investment lawyers may also represent brokerage firms that are facing investor allegations of fraud or misconduct.

Our Investment Lawyers

We exclusively work with investors who we believe have an excellent chance of recovering losses. Our team does not represent brokerage firms, although attorney Jonathan Kurta has previous experience defending brokerage firms and is familiar with their defense strategies.

If you believe you may have suffered losses as the result of broker fraud or misconduct, contact one of our securities attorneys today. Call (877) 600-0098 or email info@kurtalawfirm.com.

Securities Lawyer Jonathan Kurta
Written by: Jonathan Kurta

Jonathan Kurta is an accomplished securities attorney and a founding partner at Kurta Law.