Selling Away Attorney Phoenix
Before a stockbroker can recommend or sell an investment to a customer, the investment must be approved by the brokerage firm. Many times, however, stockbrokers sell investments that have not been approved. This is known as “selling away” from the firm. When a stockbroker does so, the customer may have a cause of action if the investment loses money.
There are many reasons why a stockbroker may sell securities not approved by the firm. Here are some examples:
- To make private placements in securities not held or offered by the firm
- To earn commissions from the promoter of the investments and not have to share them with the brokerage firm
- To sell investments associated with the broker’s outside business activities that are separate from the firm
Stockbrokers often invest in the outside activity or are actually the promoters of the investment. Brokerage firms have a duty to supervise stockbrokers and ensure they sell approved investments. Each case is different, but many times stockbrokers use their firm’s e-mail address, meet with clients at the firm to discuss the outside investment or brazenly sell an investment without attempting to conceal it from the firm. If the brokerage firm fails to properly supervise and does not detect sales of unapproved products, the firm could be held responsible for investment losses.