Broker Misconduct Claims Attorneys
Industria Business Lawyers represents investors in claims against broker-dealers and their representatives involving best interest and suitability, excessive and unauthorized trading, misrepresentation, supervision, and selling away.
Investors who lose money in a brokerage account usually direct their claims at the broker-dealer and the registered representative who handled the account. Regulation Best Interest, 17 CFR 240.15l-1, governs recommendations to retail customers. FINRA rules address suitability, discretionary trading, supervision, and outside activity. The federal anti-fraud provisions, 15 U.S.C. 78j(b) and 17 CFR 240.10b-5, reach untrue statements and misleading omissions of material fact in connection with the purchase or sale of a security.
Industria Business Lawyers represents investors nationwide in claims against FINRA member firms and their associated persons. The forum itself is covered on our FINRA arbitration page. Every provision cited here was read from the Code of Federal Regulations, the United States Code, or the FINRA rulebook. A consultation is free.
The Rules Behind These Claims
Each type of claim rests on a specific federal regulation, statute, or FINRA rule.
Best Interest and Suitability
17 CFR 240.15l-1(a)(1) requires a broker-dealer, and a natural person associated with one, when recommending a securities transaction or investment strategy to a retail customer, to act in the retail customer’s best interest at the time the recommendation is made, without placing its own financial or other interest ahead of the customer’s. Under section 240.15l-1(a)(2), it is satisfied through four components: disclosure, care, conflict of interest, and compliance. For recommendations not subject to Regulation Best Interest, FINRA Rule 2111 requires a reasonable basis to believe a recommendation is suitable for the customer based on the customer’s investment profile.
Excessive Trading
Excessive trading, often called churning, is addressed three ways. The care obligation in 17 CFR 240.15l-1(a)(2)(ii)(C) requires a reasonable basis to believe that a series of recommended transactions, even if in the customer’s best interest when viewed in isolation, is not excessive when taken together in light of the customer’s investment profile. Supplementary Material .05(c) to FINRA Rule 2111 applies a parallel quantitative test and identifies the turnover rate, the cost-equity ratio, and in-and-out trading as factors that may provide a basis for a finding. FINRA Rule 3260(a) prohibits transactions in a discretionary account that are excessive in size or frequency in view of the account’s financial resources and character.
Unauthorized Trading
FINRA Rule 3260(b) prohibits a member or registered representative from exercising discretionary power in a customer’s account unless the customer has given prior written authorization to a stated individual and the firm has accepted the account in writing. Rule 3260(c) requires the firm to approve each discretionary order promptly in writing and to review discretionary accounts at frequent intervals. Trades placed without the customer’s instruction or a written grant of discretion are measured against those requirements and against FINRA Rule 2010, which requires members to observe high standards of commercial honor and just and equitable principles of trade.
Misrepresentation and Omission
Section 10(b) of the Securities Exchange Act, 15 U.S.C. 78j(b), prohibits using a manipulative or deceptive device in connection with the purchase or sale of any security in contravention of the rules the SEC prescribes. 17 CFR 240.10b-5 makes it unlawful to employ a scheme to defraud, to make an untrue statement of a material fact, or to omit a material fact necessary to make the statements made not misleading, in connection with the purchase or sale of any security. 15 U.S.C. 78o(c)(1)(A) prohibits a broker or dealer from effecting a transaction in, or inducing the purchase or sale of, a security by any manipulative, deceptive, or other fraudulent device, with exceptions for commercial paper, bankers’ acceptances, and commercial bills, and FINRA Rule 2020 states a parallel prohibition for members.
Failure to Supervise
FINRA Rule 3110(a) requires each member to establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations and FINRA rules, and Rule 3110(b)(1) requires written supervisory procedures. Regulation Best Interest separately requires written policies and procedures reasonably designed to identify and disclose or eliminate conflicts of interest, to eliminate sales contests and quotas based on sales of specific securities within a limited period, and to achieve compliance with the regulation. A supervision claim asks whether those systems existed and were enforced.
Selling Away and Outside Activities
FINRA Rule 3280 prohibits an associated person from participating in any manner in a private securities transaction, defined as a securities transaction outside the regular course or scope of the person’s employment with the member, without first giving the firm written notice describing the transaction and the person’s role. Where selling compensation is involved, the firm must approve or disapprove in writing, and an approved transaction must be recorded on the firm’s books and supervised as if executed on the firm’s behalf. FINRA Rule 3270 requires prior written notice before a registered person takes a position with, or is compensated by, another person for business activity outside the scope of the relationship with the firm, and its Supplementary Material .01 requires the firm to consider whether customers will view the activity as part of the firm’s business.
How These Claims Are Evaluated
The account records, the recommendations, and the firm’s supervisory systems are reviewed before a claim is filed.
Which standard applies? Regulation Best Interest applies to recommendations to a retail customer, defined in 17 CFR 240.15l-1(b)(1) as a natural person, or the legal representative of one, who receives a recommendation from a broker-dealer or its associated person and uses it primarily for personal, family, or household purposes. Recommendations outside that definition are evaluated under FINRA Rule 2111.
What did the firm know about the customer? The investment profile described in 17 CFR 240.15l-1(b)(2) and FINRA Rule 2111(a) includes age, other investments, financial situation and needs, tax status, investment objectives, investment experience, time horizon, liquidity needs, and risk tolerance. The account information required by FINRA Rule 4512 and the essential facts required by Rule 2090 are compared with the customer’s actual circumstances.
Recommended or unauthorized? A transaction the customer did not approve is reviewed against the written-authorization requirement of Rule 3260(b).
Conduct away from the firm. Where a representative sold an investment the firm did not offer, the questions are whether notice was given under Rule 3280 or Rule 3270, what the firm did with it, and whether the supervisory system required by Rule 3110 was reasonably designed to detect the activity. At the customer’s request, FINRA Rule 12200 requires arbitration of a dispute between a customer and a member or associated person arising in connection with the business activities of the member or the associated person, other than insurance business activities of a member that is also an insurance company.
Timing. The date of each transaction is fixed early and checked against the six-year eligibility limit in FINRA Rule 12206(a) and any applicable statute of limitations.
Read more...
They consistently deliver thorough and timely work. We wholeheartedly recommend IBL.”
Client testimonials describe individual experiences. You may not obtain the same or similar results.
Read more...
I would recommend working with Aaron and team.”
Client testimonials describe individual experiences. You may not obtain the same or similar results.
Read more...
As a result, we’ve continued to rely on them as our go-to legal counsel for ongoing corporate matters.”
Client testimonials describe individual experiences. You may not obtain the same or similar results.
Read more...
The attorneys were incredibly responsive, guiding me through every step of the process with clarity and professionalism.
They took the time to address all my questions and concerns, ensuring that I felt confident in each decision we made. Their attention to detail and thoroughness were evident in the documents they prepared, which gave me peace of mind. What stood out most was their commitment to my vision. They not only provided legal advice but also offered valuable insights into the industry, helping me navigate potential challenges and seize opportunities.
Overall, working with IBL was a fantastic experience. They made a complex process manageable and stress-free. Thank you for your outstanding support.”
Client testimonials describe individual experiences. You may not obtain the same or similar results.
How We Handle a Claim Against a Brokerage Firm
Statements, confirmations, new account forms, and correspondence gathered and read.
The documented investment profile compared with the customer’s actual circumstances and each recommendation.
Turnover, cost-equity ratio, in-and-out trading, and authorization reviewed across the account.
The firm’s supervisory system, written procedures, and any notices under Rules 3270 and 3280 examined.
Regulation Best Interest, FINRA rule, and anti-fraud theories matched to the proof.
Statement of claim prepared against the firm and, where the facts support it, the representative, with Rule 12206 checked.
Settlement, mediation, or an arbitration award.
FAQ
01 • Investors How is Regulation Best Interest different from the suitability rule?
Regulation Best Interest, 17 CFR 240.15l-1, applies to recommendations to retail customers and requires that the recommendation be in the customer’s best interest, with added disclosure, conflict-of-interest, and compliance obligations. FINRA Rule 2111 requires a reasonable basis to believe a recommendation is suitable, and its Supplementary Material .08 provides that it does not apply to recommendations subject to Regulation Best Interest.
02 • Investors What is churning?
Churning is excessive trading. 17 CFR 240.15l-1(a)(2)(ii)(C) and Supplementary Material .05(c) to FINRA Rule 2111 both require a reasonable basis to believe that a series of recommended transactions is not excessive when taken together, and Rule 2111 lists the turnover rate, the cost-equity ratio, and in-and-out trading as factors that may support a finding.
03 • Investors My broker sold me an investment the firm did not offer. Did the firm have obligations?
If the sale was a private securities transaction, FINRA Rule 3280 required the broker to give the firm prior written notice, and where selling compensation was involved, the firm had to approve or disapprove in writing and supervise an approved transaction as if executed on its behalf. Rule 3110 separately requires a supervisory system reasonably designed to achieve compliance. How those obligations apply depends on the facts.
04 • Investors Can a firm rely on a signed disclaimer?
Supplementary Material .02 to FINRA Rule 2111 states that a member or associated person cannot disclaim any responsibilities under the suitability rule, which governs recommendations not subject to Regulation Best Interest, and section 29(a) of the Securities Exchange Act, 15 U.S.C. 78cc(a), separately makes void any provision binding a person to waive compliance with the Act, the rules under it, or a FINRA rule. Signed forms still bear on what the firm knew about the customer.
05 • Investors How long do I have to bring a claim?
FINRA Rule 12206(a) makes a claim ineligible for arbitration where six years have elapsed from the occurrence or event giving rise to it. Rule 12206(b) provides that dismissal under the rule does not prohibit pursuing the claim in court, and Rule 12206(c) provides that the rule does not extend applicable statutes of limitations.
Investors with accounts at FINRA member firms, in any state. Call (202) 860-1210 or describe the account through the form. Free consultation. Every claim is evaluated against the rule text in force.
This page provides general information about claims against broker-dealers and their associated persons and does not constitute legal advice. Reading it does not create an attorney-client relationship with Industria Business Lawyers. Whether a claim exists depends on the facts and the law in force. Provisions cited were read on September 28, 2026 from the Code of Federal Regulations at ecfr.gov, the United States Code, and the FINRA rulebook at finra.org; the SEC approved new FINRA Rule 3290 in September 2026, which will replace Rules 3270 and 3280 on an effective date FINRA has not yet announced.