THAT DEPENDS - TO SOME THEY DO AND TO SOME THEY DON’T

Full service securities brokerage firms owe their clients certain fiduciary duties. They have an obligation to clients to whom they offer investment advice or recommendations, to make reasonable efforts to assure that their investments are “suitable.”  They also have a duty to monitor the client’s investments on an ongoing basis and warn the clients of any undue risks.

Discount brokers, on the other hand, make no recommendations and therefore, take the position that they owe their clients no duties other than to execute trades in accordance with the clients’ instructions. Thus, when a discount broker permits a client to commit “economic suicide” by making wholly unsuitable or extremely risky investments or over-trading the account, the broker can avoid liability by claiming it had no duty to monitor the client’s investments or warn him of their unsuitability or riskiness.