Financial Advisor Misrepresentations and Omissions

Misrepresentations and Omissions

Financial advisors are legally obligated to tell clients all of the material facts about the specific investment that they’re providing advice on. Despite this, there are instances where this doesn’t happen. When financial advisor misrepresentations and omissions are made, the clients of the advisor may have cause for legal action.

Financial Advisor Misrepresentations

Sometimes, a financial advisor will lie, or intentionally misrepresent, some of the facts surrounding a particular investment. Examples include claiming that the investment is less risky than it actually is, saying that a company is doing better than it is, or lying about how much commission the advisor is making for selling the investment in question.

These and similar financial advisor misrepresentations and omissions are grounds for legal action. Not only can you sue in a civil case, but the advisor may also face criminal charges. It is entirely possible for an advisor to face both types of legal repercussions.

Not all misrepresentations are done intentionally. If the advisor has good reason to believe what he or she claimed and can prove that due diligence was done to the normal standards, the advisor likely will be found to have done nothing wrong. Cases like this happen when the company behind the stocks or bonds in question puts untruths in its financial statements. Then, it is the company that is liable, not the advisor who relied on the false information it provided.

A misrepresentation being unintentional isn’t a surefire way for an advisor to escape legal repercussions. If it turns out that the advisor didn’t bother to sufficiently check into the investment, it is a case of negligence. This is legally actionable both civilly and criminally.

Financial Advisor Omissions

Not all lies involve making up falsehoods and presenting them as facts. They can also take the form of simply omitting negative information. Because of this, the act is sometimes referred to by the general public as “lying by omission.”

One good example is if a financial advisor learns of negative news that will adversely impact a publicly traded company in the near future. Such news would drive down the price of that company’s stock once it became well known. If the advisor doesn’t tell potential investors about this news while they’re considering a purchase of that stock, a material omission has been made.

Financial advisor misrepresentations and omissions can occur with any sort of investment, not just stocks. It can be very tempting for an advisor to just sit on any information that would decrease the chance of him or her making a sale, and all too often, this temptation wins out.

Of course, those who willingly and knowingly omit information about an investment are legally liable. Both civil and criminal cases may result from this malfeasance. However, just as with misrepresentations, the advisor will not be liable if he or she made an honest attempt to learn all of the facts and to transmit them all to the client.

Legal Action for Financial Advisor Misrepresentations and Omissions

Deciding whether or not to take legal action over financial advisor misrepresentations and omissions requires considering a few key factors.

How Much Money Did You Lose?

The amount of a potential legal award depends, in part, on how much money you lost. This makes it so that if you didn’t actually lose any, or only lost a negligible amount, it may not be worth going to court. That said, financial advisor misrepresentations and omissions are punishable offenses, so it’s still possible for you to get an award as a form of punitive judgment against the perpetrator. Because of this, you should talk to an attorney before dismissing the idea of a suit.

How Long Are You Willing to Fight?

Some legal cases are settled quickly, but there is the possibility that legal action can last for years due to extensions and appeals. The more money is at stake, the higher the chance of delays. We will discuss this with you at your consultation so that you know what to expect for your specific case.

How Well Can the Allegations Be Proven?

This is the lynchpin of a civil case. In order to win, you have to be able to prove your allegations. We can advise you on what records count as proof for your case, and even help you collect some of the documents. It is also important to have proof even if you intend to negotiate a settlement instead of going to court. Your former financial advisor will be more willing to accept a settlement offer if he or she knows that you have definite proof of wrongdoing.

Consultation for Financial Advisor Misrepresentations and Omissions

If you believe that you are the victim of financial advisor misrepresentations and omissions, contact us here at The Schwartz Law Firm. We’ll set up a consultation to discuss your case and determine the best way for you to seek justice.