What is Price Fixing?

Many people often as what is price fixing? Price fixing is an agreement among competitors to raise, lower, or stabilize pricing of products or services. Generally, antitrust laws in the United States require that each company establish its own pricing and terms based on market supply and demand, rather than collude with competitors to determine pricing or terms that are not driven by fair competition and market forces. When competitors join together to agree upon pricing of products or services, the pricing is usually higher than it would be if it had been determined by normal market forces.

Types of Price Fixing

While not all price similarities among competitors are the result of price fixing, there are several different ways companies conspire to collude on pricing or otherwise violate the Sherman Antitrust Act, including:

  • Unnaturally high prices
  • Pricing policies (minimum or maximum prices and terms of sale, including financing)
  • Bid rigging
  • Anticompetitive collusion
  • Market division or allocation schemes

Call a Los Angeles Securities Attorney Today

The U.S. Department of Justice generally pursues price fixing violations, while the government handles fines for price collusion and other violations. If you believe you or your company has fallen victim to price fixing, you should contact an experienced Los Angeles securities attorney today to discuss your rights.

What is Investment Fraud & Stockbroker Misconduct?

What is Investment Fraud & Stockbroker Misconduct?

When you are planning for your family’s long-term future, a prudent financial strategy is critical. It is important to know that you can rely on the advice of your stockbroker when deciding how and where to invest your savings in the stock market. Unfortunately, and in an effort to make a sale, a stockbroker might induce you to invest on the basis of false or incomplete information – this is investment fraud, and is also known as stock fraud. This sort of misinformation or incomplete information is just one of several ways that your stockbroker may have committed a violation of securities laws.

Types of stockbroker fraud can include:

  1. Unsuitable or untenable investments
  2. Misrepresentation of Facts
  3. Failure to Diversity or Overconcentration
  4. Churning
  5. Withdrawal of funds without proper authorization

When you speak with a stockbroker, he or she must disclose both the positives and negatives of any particular investment. Investment fraud can result from stockbroker misconduct in many other ways, including as a result of theft or embezzlement, misstatements in public reports, insider trading and much more.

As a result, investors suffer significant losses because they were not told the truth or the risk of an investment. A stockbroker must always explain the nature of an investment – even if you are given only truthful information about a particular investment, a failure or omission to tell an investor about the risks of an investment also constitutes fraud. A stockbroker has a duty to tell you both the good and the bad about any type of investment.

It is important to realize that even if your stocks lose money, it isn’t necessarily investment fraud or stockbroker misconduct. The stock market does rise and fall, and if you are concerned over potential losses you should consult your stockbroker and discuss your investment portfolio and strategy and consider an alternate course of action.

Contact a Los Angeles Securities Fraud Attorney Today

How to Avoid Securities Fraud Churning in Your Investment Portfolio

When a stockbroker buys or sells securities for the primary reason of creating a commission and not because the trade makes financial sense for the investor, this is known as “churning,” and is a violation of SEC rules and securities laws, including SEC Rule 15c1-7 and others. Securities fraud churning is performed by stockbrokers looking to increase their income through a series of trades, often unbeknownst to the investor that may not appear illegal on the surface.

In fact, commissions in connection with excessive trading can make it very difficult for an investment portfolio to be profitable, and goes against the principle that the investor’s interests come first. While it can be difficult to quantitatively measure churning, excessive buying and selling that does not appear necessary to fulfill the investor’s goals and can be considered evidence of churning.

The Financial Industry Regulatory Authority (FINRA), also has a series of rules that include interpretive material on churning, which they call “quantitative suitability.” According to FINRA, “A member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation.”

Churning can only occur if the broker has the authority to make trades on behalf of the investor at his or her own discretion. Generally speaking, this is typically handled through a formal written discretionary agreement.

How to avoid churning:

  • Maintaining control over your portfolio and requiring your authorization prior to any trade.
  • Use a fee-based account instead of a commission-based account, since this will help make sure your interests are truly aligned with yours and not as a means for financing your stockbroker’s personal accounts with your funding.

Call a Los Angeles Securities Lawyer Today

If you believe your stockbroker has been churning your account, you may have certain legal rights which may require your immediate attention. You should contact an experienced Los Angeles securities lawyer today to discuss your rights.