Investment Advisor Misconduct
Investment adviser misconduct is a breach of the fiduciary duty every registered investment adviser owes its clients: to act in the client’s best interest and disclose every conflict. Tracy Pride Stoneman represents investors in these claims in FINRA arbitration nationwide, from Westcliffe, Colorado.
By Tracy Pride Stoneman, securities arbitration attorney Updated
| What happened | Rule or law | How it is proved |
|---|---|---|
| Breach of fiduciary duty | Investment Advisers Act of 1940 §206; the SEC’s 2019 Interpretation Regarding Standard of Conduct for Investment Advisers; state adviser statutes | Form ADV disclosures against what the adviser actually did |
| Undisclosed conflicts, fees and revenue sharing | Advisers Act §206; Form ADV Part 2A | Fee schedules, revenue-sharing and 12b-1 arrangements, the firm’s own compensation grid |
| Custody abuses and misappropriation | Advisers Act Rule 206(4)-2 (the Custody Rule) | Bank and custodian records, surprise-examination reports |
| Forum | FINRA Rule 12200 where the adviser is also a FINRA member or associated person; otherwise AAA or JAMS under the advisory agreement, or court | The arbitration clause in the advisory agreement |
A FINRA panel can award compensatory damages (out-of-pocket losses or market-adjusted “well-managed account” damages), interest, costs, attorney’s fees where a statute or contract allows them, and punitive damages in egregious cases. Claims must be filed within six years of the events under FINRA Rule 12206, and shorter state statutes of limitation may also apply.
If any of this sounds like your account, the next step costs nothing: a free, honest evaluation. Tell me what happened or call (719) 783-0303.
Common questions
Investment Advisor Misconduct: what clients ask
How is an investment advisor different from a stockbroker?
Advisors are regulated under the Investment Advisers Act of 1940 and owe a fiduciary duty at all times. Brokers are regulated by FINRA. Many professionals are registered as both.
Do advisor disputes go to FINRA arbitration?
Not always. If the advisor is not a FINRA member, the dispute may go to a different arbitration forum or to court, depending on the advisory agreement.
What are common advisor claims?
Undisclosed conflicts of interest, excessive or hidden fees, unsuitable strategies, poor supervision of third-party managers, and failure to follow the client's stated objectives.
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