Unsuitable Investments

Financial advisers must make recommendations that are consistent with a customer’s risk tolerance, age, income, net worth, and other investment objectives. A financial adviser has a duty to know his or her client and only recommend investments and trading strategies that are suitable for that client. An investment may be unsuitable if a customer does not have the financial ability to incur the risk associated with a particular investment, or if the investment was not in line with the investor’s financial needs; or if the customer did not know or understand risks associated with certain investments.

A financial adviser has a duty to understand the risk tolerance of an investor, the tax considerations for the client, the client’s prior experiences and appetite for risk, and the level of return desired. It is the duty of a financial adviser to make recommendations that are appropriate and suitable given his client’s circumstances. If a financial adviser breaches those duties and makes unsuitable recommendations for a client, the broker may be liable to that client.

In addition, broker-dealers are required to recommend securities only if they satisfy the “reasonable basis” suitability test. To satisfy this test, broker-dealers must conduct adequate due diligence on an investment, typically a private placement, before recommending an investment to any investor.

If you suspect that your financial adviser has made unsuitable investment recommendations, please contact Wittenberg Law to discuss your legal rights and options.