National investment fraud law firm, KlaymanToskes (“KT”), commences an investigation into full-service brokerage firms for the mismanagement of concentrated, company stock positions accumulated through employer sponsored plans. The investigation focuses on whether full-service brokerage firm recommendations for an “exercise and hold” strategy represents unsuitable investment advice and a failure to supervise the management of concentrated, leveraged positions in employer company stock.
Investment portfolios holding large concentrated stock positions carry significant downside risks, especially when leveraged by a margin loan. Full-service brokerage firms whose customers hold large concentrated stock positions have a duty to ensure that their customers understand the risks associated with concentration and to disclose and recommend the availability of risk management strategies, such as a “zero cost” collar, which can be used to protect the value of a concentrated, leveraged portfolio. The failure to use risk management strategies as well as the failure to “hedge” the value of a concentrated portfolio directly exposes an investor’s concentrated, leveraged position to fluctuations in the volatile securities markets.
The sole purpose of this release is to investigate whether strategies deployed by full-service brokerage firms were suitable for investors with concentrated, leveraged stock positions in employer company stock. Investors who held concentrated, leveraged positions of employee stock in accounts at full-service brokerage firms, and have information relating to the manner in which the firm handled their portfolios are encouraged to contact Lawrence L. Klayman, Esq., at (561) 542-5131, and download our Special Investor Report.