By Cody Berne
With a years-long bull market possibly coming to an end, now is an important time to take a close look at your investments. Over the years, we have represented many clients who first saw signs of mismanagement or fraud in market conditions like we have today. Mistakes made by even well-intentioned financial planners and advisors, stock brokers, and others who sell investment products often come to light at the end of a bull market. Investment frauds sometimes unravel during times of high volatility or bear markets when it is difficult to conceal illegal acts or when easy sources of financing disappear.
Having a basic understanding of common legal claims is an important starting point for an investor who suspects that they are the victim of fraud or other financial misconduct.
1. Oregon Securities Laws
Under the Oregon securities laws, there are two broad categories of claims. The first involves technical claims, including sales by an unregistered salesperson and sales of unregistered securities. In general, it is a violation of Oregon law for an unregistered salesperson to sell a security. Unless an exemption applies, it is also generally a violation of the Oregon securities laws to sell an unregistered security.The second broad category of claims involves misrepresentations or omissions. Common misrepresentations or omissions include inadequate risk disclosures, misleading projections or reports about financial performance, or false statements about business operations. In securities fraud cases under Oregon law, the seller is potentially liable as are officers, directors, managing members, control persons, and anyone who participates or materially aides in the sale of a security.
2. Breach of Contract
For some investors, the strongest claim is for breach of contract. We often consider bringing a breach of contract claim when an investor receives a promissory note or some other contractual right to payment and the debtor fails to honor the terms of the note. Promissory notes or some other contractual right to payment are often issued to investors who purchase LLC membership units or shares in a partnership.
3. Elder Abuse
A defrauded investor who was 65 years of age or older at the time they invested should also consider a claim for financial elder abuse. These claims typically involve the wrongful taking of an investor’s money. While there is little guidance from Oregon courts about financial elder abuse in the securities fraud context, bringing an elder abuse claim along with other claims can create additional risk for a defendant. In particular, a plaintiff who prevails on a financial elder abuse claim is entitled to treble damages and attorney fees.
4. Unsuitable Investments
Unsuitability claims arise when a broker makes an investment that is inconsistent with an investor’s goals and investment profile. The broker should consider the investor’s age, risk-tolerance, financial goals, net worth, and other factors when recommending an investment. When an investment recommendation is out of line with these factors, the investment might be unsuitable for the investor. For example, it might be unsuitable for a retired investor who plans to live off interest from fixed income investments to have a significant percentage of their assets invested in a volatile, equity options fund.
Other common claims brought by Oregon investors include breach of fiduciary duty, common law fraud, churning, and unauthorized trading.
If you believe that you are the victim of financial fraud or other misconduct and want to know more about your rights, it is generally not in your interest to wait to speak with a lawyer. Because statutes of limitations and other time-based defenses can limit an investor’s rights, we generally do not advise our clients to wait to bring a claim.
The information contained in this post does not constitute legal advice, and does not create an attorney-client relationship. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained in or linked to this post.