Breach of Promise / Contract
When an investor meets with a brokerage firm and discusses his or her investment objectives, financial needs and tolerance for risk with the broker, certain promises are made regarding the handling of the account, consideration is paid based upon those promises and a contract is formed. Contracts can be oral, written or implied by the actions of the parties. If the account is not handled in accordance with the promises made and investment losses occur, the investor might be able to recover for those losses through legal action.
When investment accounts are opened at brokerage firms, a new account agreement is almost always signed. During this meeting, the broker will ask questions regarding employment, investing experience, financial situation, financial needs, time horizon and tolerance for risk, in order to determine how to invest and allocate the available assets. This agreement usually exists in addition to promises made to the clients. Most claims against brokers involve breach of both written agreements as well as oral promises.
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