Not all losses suffered in an investment account are the fault of your broker, but many times they can be. We will analyze your specific situation and advise you whether we think that your broker contributed to your losses as a result of negligent or intentional misconduct, including securities fraud. A broker’s misconduct can range from outright fraud to simple negligence or mistake. If we determine that your broker is at fault, we will advise you of your legal options. Often, the proper course of action is probably to file a FINRA Arbitration Proceeding against your broker and the firm that employed him/her.
FINRA is the “Financial Industry Regulatory Authority.” FINRA is a non-governmental regulator of securities firms that focuses on investor protection and market integrity through effective and efficient regulation of the securities industry. It helps write securities rules and guidelines and enforces them in the U.S. FINRA also administers the largest arbitration forum (with more than 70 hearing locations) designed to resolve securities-related disputes between and among investors, securities firms, and brokers.
Investors can learn more about FINRA at www.finra.org
FINRA Arbitration is a legal proceeding designed to address disputes between investors and their brokers or the firms that employ the brokers. It is similar to a trial in court, but instead of having a judge and jury, your case is decided by one or more arbitrators. Arbitrators tend to be lawyers, accountants, professors, bankers, brokers, or other professionals. They review the law and evidence presented by the parties and render a final, binding award.
FINRA charges a filing fee based on the amount of the claim. For example, a claim worth between $50,000 and $100,000 costs $957 to file, while a claim worth over $5 million costs $2,250 to file. If a case settles, a portion of the filing fee is typically refunded by FINRA. In most agreements with our clients, we will agree to advance all costs of the arbitration (including the filing fees) subject to a right of reimbursement from anything received by award or settlement.
We typically handle securities arbitrations on a contingency fee basis. If you do not recover anything, you do not owe us any legal fees. If you do recover all or a portion of your claim by way of a settlement or arbitration award, however, you are responsible for paying us a percentage of the amount recovered.
Most new account forms (or contracts) with a brokerage firm contain a provision known as a “Pre-Dispute Arbitration Clause” requiring investors to pursue any claim or dispute against the firm or the broker working for the firm in FINRA arbitration rather than in court. While you do lose the right to a jury in arbitration, there are other differences between arbitration and court that can make arbitration more advantageous.
FINRA’s rules provide that the arbitration proceeding will take place at the FINRA location “closest to the customer’s residence at the time of the events giving rise to the dispute.” FINRA offers 72 hearing venues, including at least one in each state of the United States, one in San Juan, Puerto Rico, and one in London, UK.
Both mediation and arbitration are alternatives to litigation in court, and both involve the assistance of a neutral independent third party. They differ in that arbitration typically involves a final, binding decision by an arbitrator, and mediation typically involves a non-binding recommendation to the parties on how to resolve their dispute.