Breach of Contract
When an individual or company promises something, and someone else pays money in exchange for those promises, two parties enter into a contract. Contracts may take many forms: oral, written, or even implied. Legal action may be taken when such contracts, even oral or implied contracts, are breached.
If an investor opens an account with a brokerage firm and believes that their account will be handled in a certain manner, a contract may be found to exist between the brokerage firm and the investor. The investor may be able to seek damages for breach of contract if the account if losses occur.
A new account agreement is usually signed when investment accounts are opened. This agreement creates additional obligations towards the investor. Most claims against stockbrokers and other investment advisors involve breaches of this contract as well as other, oral or implied promises.
Finally, stockbrokers and their firms have contractual agreements self-regulatory organizations such as FINRA to become registered representatives and member firms. Investors are the third-party beneficiaries of these contracts with the regulators and may bring actions under these contracts as well.
Finally, under the shingle theory, cases have determined that when a brokerage firm hangs its shingle it has a duty to investors to follow the rules and regulations of the securities industry.
Help us evaluate whether you can seek recovery for “breach of contract”.