Security Recommendations and the Liabilities of Broker-Dealers

Matthew L. Kozora

Journal of Law, Finance, and Accounting, 2017, vol. 2, issue 2, 385-428

Abstract: I investigate the liabilities of broker-dealers when providing security recommendations from the arbitration of investor claims. I classify the securities at issue as either opaque or non-opaque depending on the difficulty to evaluate the securities and therefore the potential for investor harm. I find that investor awards are more positive for claims involving opaque securities, and that the more positive awards relate to investor assertions of a fiduciary duty violation and to investor assertions of a suitability violation. I also find that the length of the arbitration, a measure of the cost of arbitration and a proxy for the difficulty of the two parties to directly settle the dispute, are greater for these claims. Overall, the results indicate that broker-dealers can have additional liabilities when recommending opaque securities. The results illustrate the potential significance of the securities regulatory regimes as a determinant of investment advice.

Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1561/108.00000021 (application/xml)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:now:jnllfa:108.00000021

Access Statistics for this article

More articles in Journal of Law, Finance, and Accounting from now publishers
Bibliographic data for series maintained by Lucy Wiseman ().