Disputes with financial advisers are common, particularly in periods of economic decline and volatility. When things are good most people do not carefully watch what their financial adviser or broker is doing. When things turn south people look to their financial advisers to help them out and problems are uncovered. Sometimes the complaints about financial advisers are just people looking for a place to blame losses.
Sometimes the complaints are just that the financial adviser did not personally manage a client’s accounts when the adviser was not responsible for personally managing the accounts and the client suffered market losses.
However, sometimes financial advisers fail to act ethically and legitimate claims against the financial advisers exist. These may be claims under the Deceptive Trade Practices Act (DTPA) and other consumer protection laws. If you believe a business has taken advantage of you then you should talk to a consumer protection attorney about your rights.
How Deceptive Trade Practices Act relates to financial advisers in Texas
The DTPA and other consumer protection laws protect you from businesses that engage in deceptive sales practices and fail to provide the services or goods that the consumer paid to receive. This includes financial services sales practices. Advisers engage in deceptive sales practices when they promise returns that cannot be guaranteed, deceive clients and prospective clients about the risk level of investments, the compensation structure for the adviser selling a financial product, or intentionally provides other wrong information to entice an individual to make a particular investment or buy a financial service from the adviser.
Two areas where deceptive or unethical sales practices commonly occur are:
(1) failing to consider the suitability of a particular investment before recommending it to a client; and
(2) recommending investments or services based upon the adviser’s compensation for making the sale over the client’s best interests.
Financial advisers are licensed professionals who must follow specific rules for how they recommend and sell financial services and investments. When they fall outside of these rules they often also violate the DTPA and other consumer protection laws.
DTPA claims for advisory financial services in Texas
An adviser’s liability for failing to provide financial services sold to a client is much broader. Many advisers sell clients advisory services, such as active portfolio management, financial planning and review, estate planning and so forth. Sometimes advisers charge for these services without actually performing any services or failing to perform services within the boundaries of the service agreement.
In these situations the adviser controls the availability of the services, unlike buying or selling securities which requires going into the market to execute a transaction for a client. The adviser sets the price for its services and determines whether it can provide those services without a marketplace bigger than the adviser and the client.
Clients who paid for services are at risk when the adviser fails to perform to the service contract. That’s not to say any time a client suffers a loss that the adviser necessarily failed to deliver on the service. An adviser may fail to deliver even if the client is seeing profits. The standard is whether the services match the service contract.
Texas DTPA lawsuits and limitations under agreements with financial advisers
Assuming a deceptive sales practice occurred, the client may have claims under the DTPA. The client’s agreement or agreements with the financial adviser may present a problem pursing that claim in court. The DTPA provides effective remedies to help consumers recover financial losses caused by these types of deceptive business practices.
But with financial services there is often a huge block from pursuing lawsuits based on the DTPA and other consumer protection laws in Texas that must be considered. That is FINRA arbitration.
FINRA is a self-regulating organization that provides an arbitration process for disputes between financial service providers and clients. Most financial service providers include mandatory FINRA arbitration agreements within their service contracts and account applications. Texas strongly supports arbitration agreements and FINRA arbitration.
How FINRA arbitration affects DTPA
FINRA arbitration means claims are brought before a panel of arbitrators who hear evidence and render a binding decision on the claim. Courts rarely overturn FINRA arbitration decisions due to the financial industry’s support for the FINRA arbitration process. A client harmed by an adviser’s deceptive practices may recover for losses through arbitration similar to filing a lawsuit under the DTPA or other consumer laws.
The range of recovery may not be as extensive through FINRA arbitration. FINRA arbitration is often quicker and less expensive than a lawsuit so there is both potential benefit and harm.
Consumer protection attorneys in Texas
Consumer protection laws in Texas require consumers to perform a series of specific tasks to pursue claims. If you do not successfully complete the required tasks then you may not be able to pursue your claims or not able to collect what you deserve. Contact consumer protection attorneys in Texas about your rights and whether you have a claim.
Consumer protection law firms represent clients with these claims everyday and can help you navigate the DTPA and other consumer protection laws. If you believe you suffered physical injuries or financial losses due to deceptive business practices, talk to deceptive trade practice lawyers in Texas.