Conflicts Of Interest

Unfortunately, many investment professionals recommend certain securities to their customers not to advance the customer’s financial interest, but instead to advance the financial interest of the broker and their firm. Large commissions associated with the sale of variable annuities, large commissions, and on-going compensation, sometimes associated with the sale of non-traded Real Estate Investment Trusts, private placements, structured products and new issues, where above average compensation generally accrues, often explains the motivation for the recommendation and sale of these securities.

However, sometimes brokers are told which products to sell. Mutual funds, if not proprietary mutual funds, are included on platforms which the broker can sell, or are available for sale, based upon “shelf-space” payments, advertising allotments, seminar allowances, or other kick-backs, provided to the firm in connection with the sale of these products to customers. Some firms mask the incentive to sell proprietary products, not based upon an increased commission pay-out with respect to these specific products, but based upon other factors such as the broker’s overall compensation derived from the sale of proprietary products, including annuities and mutual funds. Some firms are paid “due diligence” fees or other “costs” in connection with the approval and recommendation of the sale of certain of these products to firm customers.

Moreover, sometimes the brokers themselves are misled by their own firms, when they are provided false information regarding the risk or characteristics of a particular mutual fund touted and sold as a cash or money market like investment, otherwise risky bond funds sold as conservative investments, or investment banking deals, obscured by false favorable research by in house analysts, or large management or administration fees derived not by the broker, but by the firm itself.

If you think that you may have been the victim of a conflict of interest by your stockbroker of investment professional, you should have your fraud claims reviewed by a professional and contact us for a free evaluation.