Overconcentration

Overconcentration occurs when a broker allocates all or a large portion of an investor’s money into one security, one sector, or one industry. This is a high risk investment as the failure to diversify a portfolio increases risk of significant loss, and is considered an unsuitable investment for most investors. Diversification is a key tenet of prudent financial management and one of the main ways a broker can protect clients from extreme losses. If your broker engages in overconcentration, you may lose everything.

Brokers have fiduciary duties to allocate assets in accordance with your goals, needs, and financial situation. These fiduciary duties require acting in your best interest, including acting within the boundaries of your accepted risk. This means most high risk investments should not be part of your portfolio. If your broker doesn’t uphold their fiduciary responsibilities then they may be in Breach of Fiduciary Duty. Diversification is a key method of mitigating risk in our portfolio, allowing for possible sharp declines in a specific sector while potentially being safeguarded by profitable investments in other sectors. If your broker has practiced in the overconcentration of your investments in one security, one sector, or one industry, you may have a legitimate claim for stockbroker fraud and potential recourse to recover your losses.

If you believe your broker has failed to diversify your portfolio properly, you may be able to recover your losses. The lawyers at Goodman & Nekvasil are dedicated to protecting your rights as an investor, and may be able to help. Contact us now for a free consultation and discover what your options are for fighting investment fraud.