Victim of Investment Fraud? Here’s What to Do

What to do if you are a victim of investment fraud

Investment fraud is not a market loss. It is a legal wrong — and the difference matters. When a broker or financial adviser recommends unsuitable investments, executes unauthorized transactions, misrepresents what they are selling, or manages your account in their own interest rather than yours, they have violated federal securities laws, FINRA rules, and the terms of your account agreement. You have legal rights. You can recover your losses.

The single most important thing to understand is that time matters. FINRA Rule 12206 requires arbitration claims to be filed within six years of the events giving rise to the dispute. State securities law claims may have shorter deadlines. Many investors wait too long — consulting an attorney only after the limitations period has expired. Do not let that happen. The steps below are not a general checklist. They are the actions that preserve your legal rights and your ability to recover.

Step 1 — Recognize that what happened to you may be investment fraud

Investment fraud rarely announces itself. Most victims do not realize they have been defrauded until long after the fact — when account statements show unexplained losses, when a broker leaves the firm suddenly, when they read a news story about a regulatory action, or when an attorney reviews their account and identifies what happened. The following patterns are among the most common forms of actionable broker misconduct:

• Unsuitable investment recommendations: your broker recommended investments that were inconsistent with your age, income, risk tolerance, or investment objectives — violating FINRA Rule 2111 and Regulation Best Interest.
• Misrepresentation and omission: your broker made false statements about an investment or failed to disclose material risks, fees, or conflicts of interest.
• Unauthorized trading: your broker executed transactions in your account without your prior authorization.
• Churning and excessive trading: your broker generated excessive commissions by trading your account more frequently than your investment objectives justified.
• Overconcentration: your broker failed to diversify your portfolio, concentrating your assets in a single security, sector, or product that then declined in value.
• Variable annuity fraud: your broker recommended a variable annuity that was unsuitable for your situation, placed it inside a tax-deferred retirement account where it provided no incremental tax benefit, or switched you from one annuity to another to generate new commissions.
• Private placement fraud: your broker recommended an illiquid private securities offering that was misrepresented, unsuitable, or fraudulent.
• Elder financial fraud: a financial professional exploited your trust, diminished capacity, or social isolation to misappropriate your assets or make unsuitable recommendations.

If any of these descriptions resemble your situation, the next step is to gather your records and contact an attorney. You do not need certainty about whether fraud occurred to take action — that is what the attorney evaluation is for.

Step 2 — Gather your account records and documentation

The strength of an investment fraud claim depends heavily on documentary evidence. Before contacting an attorney — or immediately after — gather everything you have:

• Monthly brokerage account statements for the full period of the relationship
• Trade confirmations for individual transactions
• Account opening documents, new account forms, and any investment policy statements
• All written correspondence with your broker — emails, letters, text messages
• Any marketing materials, pitch decks, offering memoranda, or promotional documents related to the investments you were sold
• Notes from phone calls or in-person meetings — dates, what was said, what was promised
• Any documents you signed in connection with specific transactions or products

You do not need a complete record to begin. Bakhtiari & Harrison pursues additional records through FINRA’s discovery process — including internal compliance files, supervision records, email communications, and branch office correspondence that are not publicly available. But the more you have at the outset, the faster the evaluation can proceed.

Step 3 — Check your broker on FINRA BrokerCheck

BrokerCheck is a free public database maintained by FINRA at brokercheck.finra.org. Every registered broker and brokerage firm in the United States is listed, along with their complete registration history, employment record, and all disclosed customer complaints, regulatory actions, criminal proceedings, and financial disclosures.

Search your broker by name and review the full record carefully. Prior customer complaints involving similar conduct directly strengthen your claim — a pattern of complaints at the same firm or branch office also supports a failure-to-supervise theory against the firm. A broker with a clean BrokerCheck record does not mean misconduct did not occur — many complaints are never filed, and FINRA only discloses what has been reported. But the record is an important starting point.

Step 4 — Contact an investment fraud attorney — free consultation

Investment fraud claims are almost always resolved through FINRA arbitration — not court. Brokerage account agreements contain mandatory arbitration clauses that require disputes to be resolved through FINRA’s forum. FINRA arbitration is faster and less expensive than federal litigation, but it has its own procedural rules, arbitrator selection processes, and hearing conventions that require specific expertise.

The attorney evaluation does three things. First, it determines whether actionable misconduct occurred — not every investment loss is fraud, and an experienced attorney will tell you honestly whether you have a viable claim. Second, it identifies all potentially liable parties — the individual broker, the employing firm, and any supervising managers whose failure to supervise contributed to the harm. Third, it calculates the full range of recoverable damages — compensatory damages, consequential damages, prejudgment interest, and in appropriate cases, punitive damages.

Bakhtiari & Harrison provides free initial consultations with no obligation to proceed. Investor cases are handled on a contingency fee basis — the firm is paid only as a percentage of what it recovers, and only if it recovers. There is no upfront cost and no financial barrier to getting qualified legal advice about your situation.

Step 5 — Report the fraud to regulators

Reporting investment fraud to regulators is not a substitute for civil recovery — regulatory investigations do not compensate victims — but it creates a public record that can support your private claim and protect other investors from the same misconduct.

• FINRA: file a complaint at finra.org/investors/have-problem/file-complaint. FINRA investigates broker and firm misconduct and can impose fines, suspensions, and bars.
• SEC: file a tip or complaint at sec.gov/tcr. The SEC investigates securities fraud involving public companies, investment advisers, and registered securities offerings.
• Your state securities regulator: each state has its own securities regulator that handles complaints under state securities law, which may provide additional remedies beyond federal law.

You can report to regulators and pursue a private FINRA arbitration claim simultaneously — the two processes are independent. Filing a regulatory complaint does not start the clock on your private claim, and pursuing private arbitration does not preclude regulatory action.

Step 6 — Pursue FINRA arbitration or securities litigation

Once an attorney has evaluated your claim and confirmed that actionable misconduct occurred, the recovery process begins with the filing of a Statement of Claim with FINRA. The Statement of Claim sets out the facts, the legal theories, and the damages sought. The respondent — the broker-dealer and individual broker — then files an Answer.

From filing through the final award, standard FINRA arbitration cases take 12 to 18 months. Cases with larger damages, multiple parties, or complex financial products sometimes take longer. During the process, both sides exchange documents, take depositions, and present evidence to a panel of three arbitrators. The panel issues a written award that is binding and enforceable in federal court.

FINRA arbitration has produced some of the largest individual investor recoveries in American legal history. Bakhtiari & Harrison’s $54.1 million award against Citigroup Global Markets — which included $17 million in punitive damages — remains one of the most significant FINRA arbitration awards ever issued. That level of result requires institutional knowledge of how brokerage firms defend claims and how FINRA panels evaluate evidence — knowledge that comes only from decades of dedicated FINRA arbitration practice.

How Bakhtiari & Harrison can help

Bakhtiari & Harrison is one of the most experienced investor-side FINRA arbitration firms in the United States. Ryan Bakhtiari served as Chairman of the FINRA National Arbitration and Mediation Committee — the body responsible for administering the FINRA arbitration process — giving the firm institutional knowledge of how the system works that no competitor can match. David Harrison spent years as Morgan Stanley Dean Witter in-house counsel and began his career as a Series 7-licensed representative at Shearson Lehman Brothers, giving him direct knowledge of how brokerage firms defend claims from the inside.

• $250 million+ recovered. Four decades of results for investors in FINRA arbitration and securities litigation nationwide.
• Former FINRA NAMC Chairman. Ryan Bakhtiari chaired the FINRA National Arbitration and Mediation Committee from 2013 to 2017.
• Former Morgan Stanley in-house counsel. David Harrison spent years as Morgan Stanley Dean Witter in-house counsel and began his career as a Series 7-licensed rep at Shearson Lehman Brothers.
• Nationwide representation. The firm represents investors in all 50 states. FINRA arbitration hearings are held at the venue nearest the claimant’s residence.
• Contingency fee only. No recovery, no fee. Initial consultations are free.

Frequently asked questions — investment fraud victims

How do I know if I have an investment fraud claim or just a market loss?

The key distinction is whether your broker followed the rules. A market loss caused by legitimate market conditions is not actionable. A loss caused by an unsuitable recommendation, a misrepresentation, unauthorized trading, or a broker’s failure to act in your best interest is actionable regardless of what the market did. Many investors whose brokers point to “market conditions” to explain losses actually have viable fraud claims. The only way to know for certain is to have an experienced securities attorney review your account records. Bakhtiari & Harrison provides free evaluations.

What is the deadline to file an investment fraud claim?

FINRA Rule 12206 requires claims to be filed within six years of the events giving rise to the dispute. Some claims are eligible for tolling — the clock may not start running until you discovered, or reasonably should have discovered, the misconduct. State securities law claims may have shorter limitations periods. Do not assume you have time. Contact an attorney as soon as you suspect misconduct.

Do I need to pay anything upfront to hire Bakhtiari & Harrison?

No. Bakhtiari & Harrison represents investor claimants on a contingency fee basis — the firm is paid only as a percentage of what it recovers on your behalf. If no recovery is made, you owe nothing. The initial consultation is completely free.

What damages can I recover in a FINRA arbitration claim?

Prevailing investors recover compensatory damages — the difference between what a properly managed account would have returned and what you actually received — plus consequential damages and prejudgment interest. In cases involving investment fraud, recklessness, or willful violation of securities laws, FINRA panels can award punitive damages. California investors have additional remedies under the California Corporations Code and California elder financial abuse statutes in appropriate cases.

Contact Investment Fraud Attorneys at Bakhtiari & Harrison — free consultation

If you believe you have been the victim of investment fraud, contact Bakhtiari & Harrison today. Our FINRA attorneys evaluate every potential investor claim at no charge. Investor cases are handled on a contingency fee basis — no recovery, no fee.

Investor cases are handled on a contingency fee basis — no recovery, no fee.

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