Lack of Due Diligence

Brokerage Firms Have a Duty to Protect You

One of the responsibilities most frequently contested in arbitration proceedings is brokerage firms’ and brokers’ obligations to perform due diligence on every security they offer. The due diligence process is easily summarized as the obligation to perform reasonable investigations into every security that is sold. If you purchase an investment from a registered broker, that investment should have gone through a thorough vetting process by the firm, with corresponding documentation of the process. This independent verification is intended to ensure that the investment is legitimate and that the issuer of the offering has not made inaccurate representations regarding the security you are purchasing.

A Firm’s Responsibilities are Explicit

FINRA recognizes brokerage firms to have a “special relationship” with clients, whereby in a firm’s recommendation of an offering, it is guaranteeing “that a reasonable investigation has been made and that [its] recommendation rests on the conclusions based on such investigation.” Firms are required to follow up on any red flags discovered upon initial investigation, and provide very thorough documentation of the whole investigation process. If your brokerage firm failed to perform their due diligence investigation on a security you purchased, including noticing and following up on red flags and thoroughly documenting the whole process, you may have grounds for a claim. Contact us now for a free, confidential case evaluation to discover if we may be able to help recover your losses. Due diligence claims should be pursued with professional help, and we may be able to provide the guidance you need.

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