Breach of Fiduciary Duty

All stockbrokers have a duty to act in the best interests of their customers. They have a duty to:

(a) Recommend investments to their customers only after studying and researching them sufficiently to become informed as to their nature, price, and financial prognosis;

(b) Manage their customers' investments in a manner directly comporting with their needs and objectives;

(c) Inform their customers of the risks involved in purchasing any investments or taking the actions recommended for his/her account;

(d) Recommend only suitable actions and/or investments for their customers' accounts and not permit unsuitable actions and/or execute unauthorized transactions in unsuitable investments; and

(e) Not misrepresent any material fact to any transaction.

Churning or Excessive Trading

Churning is the practice of buying and selling securities with the same dollar more than 6 times a year. Excessive trading is the practice of buying and selling securities with the same dollar more than 2 but less than 6 times a year. This trading generates large commissions for the stockbroker and the broker-dealer, to the detriment of the customer. Both practices are actionable if they are unsuitable for an investor, given his or her investment objectives or risk tolerance.

Suitability

Under FINRA (formerly NASD) and NYSE rules, Stockbrokers must make recommendations that are suitable for their clients' investment objectives and risk tolerance.

Selling Away

A stockbroker is not permitted to sell investments not held by his broker-dealer.

Unauthorized Transactions

A stockbroker is not permitted to execute a buy or a sell order without a client's express permission or authorization.