Tips for Investors Who Have Suffered Losses (or, It’s Low Tide--Who Has Been Swimming Naked?)

Posted on March 18th, 2020 at 1:37 PM
Tips for Investors Who Have Suffered Losses (or, It’s Low Tide--Who Has Been Swimming Naked?)

From the Desk of Jim Eccleston at Eccleston Law LLC:

Investors undoubtedly have suffered losses during the most recent market downturn. Do these investors have recourse to recover those losses in securities arbitration? To answer that question, let’s explore three fertile areas of recovery.

Your Advisor Is Recommending Products You Don’t Understand. There are a lot of risky products out there, many that are considered non-traditional. Non-traditional products are complex. Those products include:

  • Exchange-Traded Funds (ETFs) with Leverage—various types of ETFs exist, but some have significantly higher risks than others. The issue is they reset every day and can become disconnected from actual market performance.
  • Non-Traded REIT’s—illiquid investments that are not listed on an exchange and which are particularly expensive and involve significant risk.
  • Reversible Notes— these “structured products” sometimes are described as “debt instruments.” Those products bear great risk and complexity, and involve factors that are difficult for advisors and investors to evaluate.

Over-Weighing Your Portfolio in Certain Sectors. Investors are encouraged to diversify their investments rather than put all or most of their money into a single, investment option. Losses are reduced when one is not “concentrated.” However, some financial advisors push too heavily on whatever is hot at the moment. Investing all or most of one's money in a single sector can be a recipe for disappointment. Few people can afford to take such a risk without some sort of safety net or fall back plan.

Over-weighting in any specific sector is called “uncompensated risk,” meaning that you are taking risk you can diversify away, and seldom receiving added returns for the greater risk. Recently, there has been far too much over-weighting in energy (oil, gas, alternative sources of energy) investments.

Leverage and Use of Margin (Borrowed Money). If your advisor uses the words “margin” or “leverage,” this should trigger grave concern. “Margin” means borrowing money to buy securities. All sorts of risk exist, including the dreaded “Margin Call” for more money. Avoid the use of leverage unless you have funds to burn.

Eccleston Law represents advisors and investors in securities matters nationwide.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

Related Attorneys: James J. Eccleston

Tags: eccleston, eccleston law, james eccleston, investors, losses, market downturn, economy

Return to Archive



If you find yourself in trouble with the regulators, call Eccleston Law, you won't regret it.

Rick R.


August 16, 2022
SEC Warns Financial Advisory Firms Regarding Conflicts of Interest Tied to Compensation

The Securities and Exchange Commission (SEC) has sent a warning to financial advisory firms that they must go above and beyond solely disclosing conflicts of interest related to employee pay programs in order to avoid regulatory scrutiny. 

August 15, 2022
FINRA Proposal Would Permit Private Homes to Serve as Non-Branch Offices

The Financial Industry Regulatory Authority (FINRA) has filed proposed changes to FINRA Rule 3110 with the Securities and Exchange Commission (SEC).

August 12, 2022
SEC Charges J.P. Morgan, UBS, and TradeStation for Deficiencies Pertaining to the Prevention of Customer Identify Theft

The Securities and Exchange Commission (SEC) has charged J.P. Morgan Securities, UBS Financial Services, and TradeStation Securities over deficiencies in their programs designed to prevent client identify theft, which violates the SEC’s Identity Theft Red Flags Rule, or Regulation S-ID.