How these situations come up
Registered investment advisers owe their clients a fiduciary duty, which generally includes acting in the client's interest and disclosing conflicts. Problems arise when an adviser misrepresents performance or risk, charges undisclosed fees, steers clients into products that benefit the adviser, or takes money for personal use. Advisers are regulated by the SEC or state securities regulators depending on size, while brokers are overseen by FINRA, and many professionals hold both roles. Knowing which role a person played in your account affects which rules apply and where a claim may go.
Records worth gathering
Collect your advisory agreement, Form ADV disclosures you received, account statements from the custodian, fee invoices, and emails or texts with the adviser. Statements from the independent custodian are especially important, since some frauds rely on fabricated reports sent directly by the adviser. You can check the adviser's registration and disciplinary history through public databases maintained by regulators. If you suspect money is being misused right now, contact the custodian and consider reporting to regulators promptly rather than waiting for the adviser to explain.
Paths to recovery
Many advisory agreements require arbitration, and accounts with broker-dealers usually go to FINRA arbitration. New York's securities statute, enforced by the Attorney General, does not give investors their own claim, so private claims rest on other grounds such as fraud, breach of fiduciary duty, or federal securities claims. Regulatory actions may result in disgorgement or fair funds for investors, though timing and amounts vary. In a first meeting, we review your agreements, trace losses, and discuss which forum and claims make sense given the adviser's assets and insurance.
