Washington securities fraud lawyers help investors who have suffered losses following broker fraud or misconduct. Unfortunately, Securities fraud is quite common – brokers in Washington may recommend securities with risk profiles that do not suit their investor’s risk tolerance, or they may recommend investments purely for the sake of their commissions. These are violations of FINRA rules and can result in settlements for the investor through a process called FINRA arbitration – the process brokerage firms require investors to use instead of suing in civil court.
What Every Washington Investor Needs to Know
Investors should know the following terms that commonly feature in investor disputes.
Solicited vs. Unsolicited: Solicited investments are investments that your broker recommends to you. Investors pick unsolicited investments themselves.
Brokers Vs. Investment Advisers: Brokers are regulated by the Financial Industry Regulatory Authority (FINRA) while Investment Advisers answer to the Securities and Exchange Commission (SEC). Keep in mind that many financial professionals answer to both. Investment advisers are fiduciaries, while brokers must adhere to the less-strict requirements of Regulation Best Interest.
Unauthorized Trading (Discretionary vs. Non-Discretionary Accounts): Unless an account is approved for discretionary trading, brokers must have investor authorization in order to execute securities transactions.
“Churning” or Excessive Trading: Securities transactions come with per-transaction fees, which create an incentive for brokers to encourage their clients to trade more often. With too many transaction fees, it becomes impossible or highly unlikely that an investor will be able to generate a profit.
Unsuitable Investments: Every investor has a specific risk tolerance. Brokers may recommend investments that they know are overly risky in order to generate more fees for themselves, or they may fail to perform their due diligence to determine how much risk is associated with a particular investment.
Misrepresentations and Omissions: Brokers are required to disclose material facts related to an investment. This includes fees, maturity dates, and potential tax implications.
Failure to Supervise: Firms are required by FINRA rules to supervise their representatives, including their representatives’ recommendations. Washington investment fraud lawyers can hold brokerage firms accountable in cases where supervisors fail to catch red flags of fraud and misconduct.
Washington Investment Fraud in the News
Recent cases of investment fraud in Washington should make investors think twice before they hand over their money – even if they are working with a supposedly reputable brokerage firm.
- In February 2024, a District judge sentenced a Spokane man to five years of probation and ordered him to pay $700,000 in order to repay investors for an alleged investment fraud. The man allegedly perpetrated this fraud through his brokerage firm, Hannes Financial Services, which offers brokerage services through Woodbury Financial. He allegedly recommended bonds that were non-existent and misappropriated $3 million from his customers.
- A married couple of real estate professionals have been indicted for fraud and money laundering after allegations that they solicited investments for a real estate fund called Halcyon. The couple allegedly misappropriated money from the fund and transferred it to their management company. One of the realtors allegedly informed investors that one of the fund’s contractors had received a cancer diagnosis and they would therefore have to delay distributions. This was allegedly false and served only to delay the inevitable. In 2019, the investors discovered they had lost their entire investments, which totaled approximately $2.25 million.
- Another Washington man allegedly posed as an investment adviser in order to engage in money laundering and wire fraud. He allegedly defrauded mostly people in religious congregations. This case underlines the importance of verifying a financial professional’s license before handing over your hard-earned money.
The Washington State Department of Financial Institutions and Securities Regulation
The Washington State Department of Financial Institutions (DFI) regulates financial services and provides consumer protection. They regularly publish press releases concerning alleged scams that investors should look out for – as of late, there have been several warnings regarding potential cryptocurrency scams.
Most Common Investor Complaints in Washington
From 2020 to 2021, there were 143 active enforcement cases. According to the 2021 Annual DFI Report, the top complaints submitted to the DFI enforcement unit were the following:
Cryptocurrency scams: Due to their still-murky regulation, cryptocurrency presents an excellent opportunity for scammers. They take advantage of the buzz around crypto to drum up interest in fraudulent products. The investment may be entirely fake, or the scam may involve a pump-and-dump, where online personalities promote a crypto investment until the increased interest increases the value of the crypto asset, at which point they sell their shares at the newly inflated price. After the promoters cash out, the newer investors are left with a worthless or nearly worthless cryptocurrency.
Unregistered securities offerings: Securities must register with the SEC as well as with state regulators. These regulations are meant to prevent investment fraud by presenting investors with an accurate picture of the issuing company and its money-making strategy.
Precious metals: Commodities like precious metals can help an investor diversify their portfolio, but they are often featured in investment scams. Beware of any cold calls from supposed “metal dealers” or advertisements you may see online.
Washington Securities Fraud Law
Blue Sky laws are the states’ versions of the Securities Act of 1934, which prohibits manipulation and deception in the sale of securities. The Revised Code of Washington, Title 21 addresses unlawful offers, sales, and purchases of securities:
It is unlawful for any person, in connection with the offer, sale or purchase of any security, directly or indirectly:
(1) To employ any device, scheme, or artifice to defraud;
(2) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or
(3) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
What Types of Cases Do Washington Securities Attorneys Handle?
In order for a Washington securities fraud attorney to represent you, you must be working with a registered broker. You can look up their Central Registration Depository (CRD) number on FINRA BrokerCheck.
If the broker is not registered with FINRA, our securities attorneys cannot take your case. You may still file a complaint with your state regulator.
Contact our attorneys today for a free case evaluation. Call (877) 600-0098 or email info@kurtalawfirm.com.