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Misrepresentation & Omission Claims in FINRA Arbitration

FINRA Rule 2210

Financial advisors and brokerage firms are required to communicate with the public in a manner that is fair and balanced.  The Financial Industry Regulatory Authority (FINRA) Rule 2210(d)(1)(A) states: 

All member communications must be based on principles of fair dealing and good faith, must be fair and balanced, and must provide a sound basis for evaluating the facts in regard to any particular security or type of security, industry, or service. No member may omit any material fact or qualification if the omission, in light of the context of the material presented, would cause the communications to be misleading.


In other words, financial advisors are required to describe investments in a fair and balanced manner, including sufficiently explaining the rewards and risks associated with each investment recommended.  

Excessive Exaggeration is Prohibited

Financial advisors and brokerage firms are also required to refrain from making, "any false, exaggerated, unwarranted, promissory or misleading statement or claim in any communication."  FINRA Rule 2210(d)(1)(B).  This means that a financial advisor may not make any of the following statements unless the statement is actually true:

  • "Investment X is guaranteed" 

  • "Investment Y will go up 10% in a month" 

  • "Investment Z is liquid and can be sold at any time" (when the investment is illiquid and subject to a minimum holding period) 

Simply put, investors must be on the look out for investments that sound "too good to be true".  If you believe you have been lied to by your financial advisor and made an investment based upon a misrepresentation or omission and suffered losses, you may be able to file a claim for your losses.  Please contact us today for a free, no-commitment consultation.

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