Minnesota Securities Fraud Lawyers: How To Recover Investment Losses
Securities fraud can have devastating financial consequences for investors. When such fraud occurs, victims need specialized legal representation to protect their interests and seek recovery. While the Minnesota Department of Commerce takes steps to prevent fraud, investors may still need to take legal action to recover their losses.
If an investor loses money on a risky security recommended by a stockbroker or investment adviser, they may be able to recover their losses through FINRA arbitration. Investment contracts typically include a pre-dispute arbitration clause that requires investors to use arbitration to resolve disputes.
FINRA arbitration differs significantly from a civil lawsuit. A Minnesota investment fraud lawyer can navigate these specialized proceedings, provide valuable insights, and build a strong case for the investor. Their expertise can instill those who have fallen victim to securities fraud with confidence as they enter into arbitration against a brokerage firm.
Minnesota Securities Laws
Minnesota Blue Sky laws address securities fraud. “Blue Sky” laws are state statutes that build on the 1933 “Truth in Securities Act,” which prohibits deceit when selling securities. Lawmakers implemented these laws to restore faith in the securities market following the 1929 stock market crash.
Chapter 80A of the Minnesota Statutes defines securities fraud:
(a) It is unlawful for a person that advises others for compensation, either directly or indirectly or through publications or writings, as to the value of securities or the advisability of investing in, purchasing, or selling securities or that, for compensation and as part of a regular business, issues or promulgates analyses or reports relating to securities:
(1) to employ a device, scheme, or artifice to defraud another person; or
(2) to engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person.
The Minnesota Department of Commerce
The Minnesota Department of Commerce oversees the registration of securities and the licensing of financial professionals, including brokers and investment advisers. Minnesota law requires brokers and broker-dealers to register with the state. The State offers exemptions from this rule, listed in Chapter 80A.56 of the Minnesota Statutes.
Enforcement Actions by the Minnesota Department of Commerce
The following are recent examples of enforcement actions. Please refer to the official Minnesota Department of Commerce website for a complete list.
- In August 2023, the Minnesota Department of Commerce announced that investors might be able to recover losses following the bankruptcy of Lear Capital. Lear Capital allegedly used deceptive sales practices in its marketing materials.
- Minnesota alleged that a cryptocurrency platform, Nexo Capital, sold unregistered securities. The state claims that Nexo’s crypto asset lending products fit the definition of a security and should have been registered with the state.
- Minnesota joined a multistate agreement to settle with Robinhood Financial over its platform’s operational failures.
Elder Financial Exploitation in Minnesota
Under the Safe Seniors Financial Protection Act, passed in 2018, the Minnesota Department of Commerce encourages financial professionals who suspect elder financial abuse to report it to the Minnesota Adult Abuse Reporting Center. This act aims to protect seniors from financial exploitation by empowering financial professionals to act. Financial professionals may also hold or delay transactions and disbursements and notify trusted third parties. These measures provide an additional layer of protection for vulnerable older adults against potential financial fraud or abuse.
What Types of Cases Do Minnesota Securities Fraud Attorneys Handle?
Minnesota securities fraud attorneys handle a variety of cases involving broker misconduct, including instances where financial professionals fail to act in their client’s best interests. Investors should be aware of the most common types of broker fraud. Look out for the following types of misconduct:
Unsuitable Investments: Investments can be unsuitable if they violate the suitability criteria outlined in FINRA Rule 2111. For instance, brokers must not recommend securities that are overly risky, given an investor’s financial goals. Brokers also must not over-concentrate the investments in an account or execute an excessive number of transactions, which will make it unlikely that a portfolio will generate a return for the investor.
Misrepresentation and Omission: Brokers must accurately characterize an investment’s risks and potential returns. They must also not omit material information, such as information regarding fees and potential tax liabilities. Federal securities laws offer protections from financial advisors who misrepresent facts about investments, and a Minnesota securities fraud lawyer with extensive experience can ensure that financial firms follow industry rules or are held accountable if they don’t.
Selling Away: If a broker solicits you for an investment outside of their firm, they may be engaging in a prohibited outside business. Investors should only agree to purchase securities offered by the brokerage firm. For that reason, investors should be cautious of messages from a broker’s personal phone or email – brokers should only communicate with investors through official channels so the firm can supervise communications.
Failure to Supervise: Brokerage firms are required to supervise their registered representatives.
Regulation Best Interest: Brokerage firms must disclose any conflicts of interest. Brokers are also required to perform due diligence to determine if there are securities that offer similar benefits with fewer costs before they recommend an investment. A Minnesota securities fraud lawyer can assess whether investment advisors provided the necessary information and offered investors with appropriate investment options in light of their investment goals.
Financial Products in Minnesota Investment Fraud
In addition to prohibited broker practices, investors should carefully consider the following risky securities before buying. These financial products often involve complex structures or high levels of risk that may not be suitable for all investors:
- Variable Annuities
- Oil and Gas investments
- Leveraged and/or Inverse Exchange-Traded Funds
- Business Development Companies
- Closed-End Funds
- REITs
- Structured Products
- Alternative Investments
- Private Placements
If you believe your broker recommended one of these investments and it did not fit your best interest, consider consulting with a Minnesota securities fraud attorney. The Financial Industry Regulatory Authority provides a platform to submit securities fraud claims outside of state and federal courts, and our law firm’s attorneys understand how best to secure justice for our clients.
Kurta Law Can Help
Our Minnesota securities attorneys offer free case evaluations, and we only earn a fee if your case settles. Call (877) 600-0098 or email info@kurtalawfirm.com to discuss the details of your case today.