For cases involving activity prior to the summer of 2020 (with the adoption of the Best Interest Rule), overconcentration of a client’s money is covered under the Financial Industry Regulatory Authority (FINRA) Rule 2111 (Suitability). Overconcentration is just a small part of this rule designed to ensure that the investment strategy brokers create for their clients is suitable for the situation of the investor.
At Meyer Wilson, we have helped countless overconcentration victims recover compensation after losing money due to the misconduct of a broker or brokerage firm. Our team of investment fraud lawyers is ready and waiting to help with your case. Contact us today to schedule your free, no-obligation case review.
What Is FINRA Rule 2111 (Suitability)?
FINRA Rule 2111 (Suitability) is designed to help ensure that investment brokers properly handle the money of their clients in the manner that best suits their needs. Under this rule, a broker or financial advisor handling the money of an investor is required to have a reasonable basis for the belief that an investment or investment strategy is in the best interest of their client.
This rule requires that financial professionals perform due diligence to ensure that all investments in which they put the money of their clients are sound. Furthermore, they must adequately assess the needs and risk tolerance of a client when building their portfolio.
In addition to covering investment errors like overconcentration, Rule 2111 also provides guidelines for brokers in a variety of other investment areas to help ensure that the money people invest with brokerage firms will be handled in a suitable manner to their needs and the financial climate.
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What does FINRA Rule 2111 Say About Overconcentration
FINRA Rule 21111 (Suitability) covers a wide range of guidelines for financial advisors, brokers, and brokerage firms. Overconcentration is just one of the many issues addressed by this rule. Regarding overconcentration, this rule states that:
In supervising an identified recommended investment strategy involving a security and a non-security component, a broker-dealer may need to consider, in addition to the customer’s investment profile, whether a recommended securities liquidation causes an overconcentration in particular securities or types of securities remaining in the account.
Having a diversified portfolio is critical for minimizing the risk for an investor. Overconcentration can lead to severe financial losses if a particular investment or asset class loses value for any reason.
Even clients who are less risk-averse need to have at least some diversity in their portfolio to help ensure long-term gains, even if risking short-term losses.
How an Investment Fraud Lawyer Can Help You Recover Losses Caused by Overconcentration
When you hire an experienced investment fraud lawyer to help you recover compensation after suffering losses caused by overconcentration, they will take over every aspect of your case to help ensure you get the money you need and deserve. They will begin by investigating the circumstances surrounding your losses to prove the liability of your broker and brokerage firm.
Your attorney will complete all the paperwork necessary to file for FINRA arbitration. As they prepare your case for a hearing in front of the arbitration panel, they will also engage in negotiations with opposing counsel, attempting to come to terms on a settlement deal.
If an agreement can not be reached, your lawyer will present your evidence, question witnesses, and argue your case before the arbitration panel. If the arbitrators rule against you, your attorney will explore your options for appealing the decision to the court if possible.
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FINRA and SEC Regulations Aim to Protect Investors
When people invest their money with a brokerage firm, they are putting their faith in the broker handling their money to act in a responsible manner and help ensure the growth of their investment. Because of the volatility of financial markets and the significant portion of the money that many people invest, brokerage firms are held to a high standard of responsibility.
Both FINRA and the Securities and Exchange Commission (SEC) have extensive regulations aimed at safeguarding investors. When investing your money, it is critical that you are able to feel confident that your investment is being handled in a responsible manner.
Without the safeguards put in place by FINRA and the SEC, financial firms would be much more likely to engage in risky trading practices that help increase the potential benefits for traders while often resulting in substantial losses for their clients.
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Reach Out to an Experienced Team of Investment Fraud Attorneys Today
When you are attempting to recover compensation after suffering financial losses related to overconcentration, having an experienced investment fraud lawyer by your side will significantly improve your odds of securing a favorable outcome. At Meyer Wilson, our team has 75+ years of combined experience and has recovered more than $350 million for our clients.
Contact us today by giving us a call or filling out our online contact form and schedule a free case evaluation with a member of our legal team.
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