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Glossary of Terms
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| Arbitration |
A process in which an investor files a claim for recovery of lost
investment funds against a broker or brokerage company. The claim may
settle or proceed to a hearing before a three-member panel of
arbitrators. |
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| Churning |
A broker's act of turning over an investor's account in excessive sizes
or frequencies solely for the purpose of generating commissions. |
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| Eligibility Period |
A period of time determined by law in which an investor can file a claim
in an arbitration forum after the investor discovers that he or she has
a claim to pursue. The length of the eligibility period varies
according to the particular case. |
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| Failure to Supervise |
This occurs when a brokerage firm fails to supervise its individual
brokers and its recommendations to investors to ensure compliance with
and prevent violations of the rules of the securities industry. |
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| Fiduciary Duty |
The highest standard of care a broker owes to an investor client, based
on the level of trust and confidence in the broker's expertise. |
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| Misrepresentation |
A breach by the broker of his duty of good faith not to misrepresent any
"material" fact - a fact that addresses the nature or quality of the
investment or the degree of risk involved - to the investor in the sale
or recommendation of an investment. |
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| National Association of Securities Dealers Registration (NASDR/NASD) |
The National Association of Securities Dealers Registration is a company
of the National Association of Securities Dealers. The NASDR/NASD are
national organizations regulating the securities industry for the
benefit and protection of investors. |
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| Omission |
Similar to a misrepresentation, an omission occurs when a broker has
failed altogether to disclose a fact material to the investor's
decision-making process. |
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| Overconcentration |
This is the failure by a broker to diversify an investor's portfolio to
provide protection against a decline in value of one particular
investment. |
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| State (Ohio) Division of Securities |
A state level organization that oversees the securities industry. The
Ohio Division of Securities is responsible for providing investor
protection and enhancing capital formation by administering and
enforcing Ohio's securities laws. |
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| Statutes of Limitations |
Periods of time defined by state law in which an investor can file a
formal securities fraud lawsuit in a court of law after the investor
discovers that he or she has a claim to pursue. The length of the
statute of limitations period varies according to the particular case. |
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| Unauthorized Trading |
A broker who buys or sells securities in an investor's account without
the prior consent of the investor has engaged in unauthorized trading. |
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| Unsuitability |
If a broker recommends an investment not in alignment with the
investor's financial situation, investment goals and objectives, future
needs, and risk tolerance, the broker may be held liable for losses from
an unsuitable recommendation. |