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Stock market losses due to coronavirus (COVID-19) may be recoverable in arbitration

Over the past three weeks, the major US stock markets have suffered losses of more than 20%. As a result, investors have seen the value of their investment accounts decline in a manner not seen since the financial crisis of 2009.

This is not a typical market “correction.“ Rather, these losses are the results of an anticipated slowing of the world economy. All across the country (and all across the world), professional sports leagues have canceled/suspended games, business conferences have been canceled, and people have been quarantined. These events have led, and will continue to lead, to a decline in business revenues – not only for the businesses directly affected by these postponements and cancellations, but also by businesses that are the indirect beneficiaries of these events.

Small businesses are also likely to suffer the most because, as the coronavirus spreads, they are least likely to be able to weather losses in revenue or shortages in staff due to illness.

Unfortunately, there has not been strong leadership from the government, and the steps that the government has taken so far have not calmed investors’ fears. In fact, according to a recent article, the government response seems to be increasing concerns, rather than reducing them.

Until we are able to get a better handle on the scope of the problem, it is likely that the stock market will continue to decline.

Investors who trust and rely on their financial advisors to make prudent decisions in managing their accounts are being left to wonder how this will end. Financial advisors are required to invest clients’ money in a suitable manner. This requires diversification amongst different asset classes (stocks, bonds, etc.) and within specific investment classes. Failure to do so can result in liability to a financial advisor and/or their firm when an investor suffers losses.

Another concern with respect to how people are responding to the coronavirus situation is that many people are looking at it with denial or strong speculation as to its severity. Many financial advisors often take the same approach with respect to events that impact the stock market. Unfortunately, denial of potential risk is not an excuse for haphazard mismanagement of client investments.

If you have suffered significant losses in your investment accounts as a result of the reaction to the impact of the coronavirus (COVID-19), you may have a claim against your financial advisor and/or his firm. The Kueser Law Firm works with clients who have suffered investment losses due to fraud or negligence of financial advisors and investment professionals. If you would like to discuss your situation, please contact Jason Kueser at 816-374-5865.

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