One of the principle tenets of modern investing is that diversification reduces risks. A properly diversified portfolio generally includes a combination of stocks and bonds spread across multiple market sectors (such as industrial, financial, energy, etc.). Overconcentration is where the broker fails to properly diversify the account. One of the highest risks an investor's account can face is where the account is entirely in only a few or even a single security. If that security performs poorly, the investment can be quickly decimated to the point of losing all value. If a broker fails to properly diversify an account, both the broker and the brokerage firm can be potentially liable for resulting losses.