In a customer claim against a broker-dealer or registered investment adviser, the strongest evidence almost always comes from the firm's own intake documents. Before any expert is retained, before any deposition is taken, the discrepancy between what the documents say and what the account did is usually the foundation of the case.

This is one of the more underappreciated facts about investor litigation. Customers who suspect they have a claim often assume they will need to prove what the adviser said — a hard task, since conversations are rarely recorded. In practice, the most persuasive evidence is what the firm wrote down at the start of the relationship and never revisited.

Three Documents That Almost Always Matter

Three documents anchor the customer-side record in most cases. They are not glamorous, and they are easy to overlook. But they are the documents that arbitrators and judges read first.

The new-account form. Every broker-dealer customer fills out a new-account form at the start of the relationship. The form captures investment objectives, time horizon, risk tolerance, liquidity needs, income, net worth, and prior investment experience. Under FINRA Rule 2090 (Know Your Customer), the broker-dealer is obligated to use reasonable diligence to know the essential facts about every customer. The new-account form is where those essential facts are documented.

What we look for: stated risk tolerance, stated investment objectives, stated time horizon, and stated liquidity needs. We then compare those to the actual composition of the account during the relevant period. When the form says "moderate" and the account holds 40% in non-traded REITs and BDCs, the discrepancy is not subtle.

The investment policy statement. RIAs typically prepare an IPS at the outset of an advisory relationship. The IPS is more detailed than a new-account form — it usually identifies a target asset allocation, permissible asset classes, rebalancing parameters, and benchmarks. The IPS is a contractual document; failing to manage the account in accordance with it is, at minimum, a breach of contract, and is often a breach of fiduciary duty under § 206 of the Investment Advisers Act.

What we look for: target allocation ranges, prohibited investments, concentration limits, rebalancing triggers, and any specific restrictions the client requested. We then compare these to actual holdings, actual transactions, and any drift that was never corrected.

The advisory agreement or customer agreement. The contract between the customer and the firm defines the scope of the relationship. For broker-dealers, this is the customer agreement — usually a standardized document that includes a pre-dispute arbitration clause and certain risk acknowledgments. For RIAs, it is the advisory agreement, which typically incorporates a fee schedule, services to be provided, and (often) a dispute resolution clause.

What we look for: the scope of services, the standard of care, the dispute resolution forum, the duration and termination provisions, and any specific representations made by the firm. We also look for amendments and side letters — documents that often change the operative terms in ways the customer did not appreciate.

The Discrepancy Pattern

The most common pattern in viable customer claims is the same: the firm's intake documents describe one kind of investor and one kind of account, and the actual account record describes another. The discrepancy can be quantitative or qualitative.

Quantitative discrepancies are the easiest to demonstrate. A customer whose stated time horizon is 3-5 years is not appropriately concentrated in illiquid alternatives with 7- to 10-year holding periods. A customer whose stated liquidity needs are "high" cannot reasonably be put into private placements with no secondary market. A customer whose stated risk tolerance is "conservative" cannot reasonably hold leveraged or inverse ETFs for any meaningful duration. These are the kinds of mismatches that arbitrators see clearly and that experts can quantify with concentration analyses, duration analyses, and risk-attribution studies.

Qualitative discrepancies are harder to demonstrate but often more powerful when they are. A new-account form indicating that the customer "has no prior experience with options" is in tension with the use of an options strategy in the account. A form indicating that the customer "has no experience with leverage" is in tension with the use of margin. The disconnect between documented sophistication and actual product use is often the foundation for a misrepresentation claim — either the customer was misrepresented to the firm, or the firm misrepresented the product to the customer, or both.

What Customers Should Preserve

If you suspect you may have a claim, the highest-priority records to preserve are the ones we have just described. Specifically:

  • The new-account form and any updates or recertifications signed during the relationship
  • The investment policy statement, if any, and any amendments
  • The advisory agreement or customer agreement, including all exhibits and any amendments
  • Account statements covering the entire relationship
  • Trade confirmations or, at minimum, the year-end summaries that aggregate them
  • Written communications with the representative or adviser, particularly any in which investment objectives, risk tolerance, or restrictions were discussed
  • Any marketing materials, pitch decks, or product brochures provided in connection with specific recommendations

The firm has copies of all of these. So does the custodian. They are recoverable in discovery if you do not have them. But preserving your own copies eliminates the risk that something gets "misplaced" between the time of the complaint and the time of production.

The Document That Isn't There

One of the most useful things to look for is what is not in the file. If the firm cannot produce a contemporaneous suitability analysis for a complex product, that absence is itself evidence. If the firm cannot produce documentation of how the IPS was actually applied in rebalancing decisions, that absence is evidence. If the supervisory file does not contain any notations responsive to red flags that should have been visible to a reasonable supervisor, that absence is evidence.

The strongest customer cases are usually built on a combination of what the firm wrote down (which is inconsistent with what the firm did) and what the firm did not write down (which is inconsistent with what the firm should have done). Both halves of that record are typically obtainable from the documents you already have at home.