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Failure to Diversify

This is a variation on a type of arbitration/regulatory complaint, which is a variation on a suitability claim. As Internet and Technology stocks roared upwards in the late 1990s, more and more investors invested in those securities. Not only did they invest in them, they left other sectors of the market, and placed an increasing percentage of their assets in Internet and Technology stocks. Now, after the bubble burst, investors are filing complaints against their brokers for the over concentration of their portfolios in these sectors.

The claim is a difficult claim to prove, for the issue is nearly always that the customer expressly desired the investment in these sectors, and that given the time, and the climate, the investments were in fact suitable for the investor, as they fit the investor's risk tolerance and investment objectives. Like most customer claims, the success of this type of claim depends heavily on the facts of the case, and the particular circumstances of the investor.

For more information, see Typical Customer Disputes at the Securities Law Home Page.

Failure to Diversify, or overconcentration, is a variation of a suitability claim. In recent years, this claim has quickly become one of the more frequent securities arbitration claims.
Copyright 2008, Beam & Astarita, LLC,