Why choose arbitration over litigation?

Arbitration is typically faster, less formal, and more cost-effective than litigation. It also provides a final resolution to disputes, with limited grounds for appeal. Most relationships with financial advisors are formalized by entering into a contract which contains a dispute resolution clause. Nationally, most dispute resolution clauses provide for FINRA arbitration.

Who can file a FINRA arbitration claim?

Investors, brokerage firms, and financial advisors can file a FINRA arbitration claim if they have a dispute related to securities or investment activities. FINRA arbitration is normally the forum for disputes among registered persons, brokerage firms and the public customer clients of the firms.

How do I start the FINRA arbitration process?

To start the arbitration process, Bakhtiari & Harrison will file a Statement of Claim with FINRA, detailing the nature of the dispute, the parties involved, and the relief sought.

What is a Statement of Claim?

A Statement of Claim is a written document submitted by the claimant outlining the facts of the dispute, legal claims, and the desired outcome.

What happens after filing the Statement of Claim?

After filing, the respondent has 45 days to answer the Statement of Claim. The answer must address the claims and may include counterclaims or other relief sought.

What fees are involved in FINRA arbitration?

Fees include filing fees, hearing session fees, and possibly member surcharges or process fees, depending on the specifics of the case.

Can I represent myself in FINRA arbitration?

Yes, you can represent yourself, but many choose to hire an attorney with experience in securities arbitration due to the complexity of the process. Investors and industry professionals who choose to represent themselves do so at a substantial disadvantage, Wall Street firms typically retain experienced professional counsel to represent their interests.

How are arbitrators selected?

Arbitrators are selected through the Neutral List Selection System (NLSS), which provides a list of potential arbitrators. Both parties rank and strike names to agree on a panel.

What qualifications do FINRA arbitrators have?

FINRA arbitrators include attorneys, accountants, financial professionals, and public members who have undergone training and meet FINRA’s qualification standards.

How long does the arbitration process take?

The process typically takes 12-18 months from filing to the final award, but this can vary based on case complexity and scheduling. Preference may be given to investors that are seriously ill or elderly.

What is a prehearing conference?

A prehearing conference is a meeting between the parties and the arbitrators to discuss procedural issues, set a schedule, and address preliminary matters including final FINRA arbitration hearing dates.

What is discovery in arbitration?

Discovery is the exchange of documents and information between the parties to prepare for the hearing. It is more limited than in litigation.

What happens during the arbitration hearing?

During the hearing, both sides present evidence, call witnesses, and make arguments. The arbitrators then deliberate and render a decision.

Is the arbitration hearing open to the public?

No, arbitration hearings are private and confidential. Only the parties, their representatives, and the arbitrators may attend.

Can I settle my case before the hearing?

Yes, parties can settle at any time before the arbitrators render a decision, often through negotiation or mediation.

What is mediation in the context of FINRA arbitration?

Mediation is a voluntary process where a neutral mediator helps the parties negotiate a settlement. It is separate from arbitration and non-binding.

What happens if I lose in arbitration?

If you lose, the arbitrator’s decision is final and binding. There are limited grounds for challenging the award in court.

What types of disputes are resolved through FINRA arbitration?

Disputes include claims of fraud, breach of fiduciary duty, negligence, breach of contract, and other issues related to securities and investments.

How are damages determined in arbitration?

Damages are determined based on the evidence presented, including financial records, expert testimony, and the specifics of the case.

Can arbitrators award attorney’s fees?

Arbitrators can award attorney’s fees if provided for by law, contract, or if both parties request it.

How do I enforce an arbitration award?

An arbitration award can be enforced in court through a confirmation process, making it a judgment that can be collected.

What is expungement in FINRA arbitration?

Expungement is the process of removing information from a broker’s record on the Central Registration Depository (CRD) system. It is only granted under specific conditions.

What are the grounds for vacating an arbitration award?

Grounds for vacating an award include arbitrator bias, fraud, corruption, or misconduct, as well as exceeding their powers.

Are arbitration awards public?

Yes, arbitration awards are published on FINRA’s website, providing transparency and access to past decisions.

What is the role of the Office of Dispute Resolution?

The Office of Dispute Resolution administers arbitration and mediation cases, ensuring that the process runs smoothly and efficiently.

What is a Simplified Arbitration?

Simplified Arbitration is for cases involving claims of $50,000 or less, allowing for a quicker and less expensive resolution without a hearing.

Can I request an expedited hearing?

Yes, in certain circumstances, such as elderly or seriously ill parties, you can request an expedited hearing.

What types of evidence are admissible in arbitration?

Evidence can include documents, emails, financial records, expert reports, and witness testimony, subject to the arbitrators’ discretion.

Can I request documents from the other party?

Yes, through the discovery process, you can request relevant documents and information from the other party to support your case.

How does FINRA handle conflicts of interest with arbitrators?

FINRA requires arbitrators to disclose any potential conflicts of interest, and parties can object to arbitrators they believe are biased.

What happens if a party does not comply with discovery?

If a party does not comply, the other party can file a motion to compel, asking the arbitrators to order compliance and possibly impose sanctions.

What is a motion in arbitration?

A motion is a formal request for the arbitrators to make a ruling on a specific issue, such as compelling discovery or dismissing a claim.

Can I request interim relief in arbitration?

Yes, you can request interim relief, such as temporary restraining orders or injunctions, to preserve the status quo pending the final decision.

How are hearing locations determined?

Hearing locations are typically determined by the location of the claimant unless both parties agree to a different venue.

What is a telephonic or virtual hearing?

Telephonic or virtual hearings are conducted via phone or video conference, allowing parties to participate remotely.

How are arbitration awards paid?

Awards are typically paid by the losing party within 30 days of the decision, unless otherwise specified by the arbitrators.

What if the losing party does not pay the award?

If the losing party does not pay, you can seek enforcement through the courts, turning the award into a legally enforceable judgment.

Are there any limits on the types of claims I can bring in arbitration?

FINRA arbitration covers a broad range of claims related to securities, but there are some statutory and regulatory limits on certain types of claims.

Can I bring a class action in FINRA arbitration?

No, class actions are not permitted in FINRA arbitration. However, you can join other claimants in a single arbitration if the claims are similar.

What is the role of expert witnesses in arbitration?

Expert witnesses can provide specialized knowledge and opinions to help explain complex financial issues to the arbitrators.

How are hearing dates scheduled?

Hearing dates are scheduled based on availability of the parties and arbitrators, with consideration for the complexity of the case.

Can I request a different arbitrator if I believe one is biased?

Yes, you can challenge an arbitrator if you believe they have a conflict of interest or bias that affects their impartiality.

What is a “chairperson” in a FINRA arbitration panel?

The chairperson is the lead arbitrator who manages the procedural aspects of the case and ensures the hearing runs smoothly.

How does FINRA ensure fairness in arbitration?

FINRA has rules and procedures in place to ensure a fair and impartial process, including arbitrator training and disclosure requirements.

How do I learn more about the FINRA arbitration process?

For more information, you can visit FINRA’s website, contact their Office of Dispute Resolution, or consult with experienced attorneys like those at Bakhtiari & Harrison.

How can Bakhtiari & Harrison help with FINRA arbitration?

Bakhtiari & Harrison can assist with filing claims, responding, selecting arbitrators, discovery, hearings, and ensuring the best possible outcome through skilled representation and strategic advice.

Can I Sue My Stockbroker? 50 Questions and Answers

Q: What is FINRA arbitration?

FINRA arbitration is a method of resolving disputes between investors and brokerage firms or financial advisors outside the court system. It involves a neutral third party, an arbitrator, who reviews the case and makes a binding decision.

Investing in the stock market can be profitable, but what happens when things go wrong? If you suspect your stockbroker has mismanaged your investments or acted unethically, you may wonder, “Can I sue my stockbroker?” In this comprehensive guide, we’ll answer 50 of investors’ most common questions about suing their stockbroker.

Understanding Stockbroker Misconduct

What is stockbroker misconduct?

Stockbroker misconduct includes fraud, negligence, unauthorized trading, excessive trading (churning), and failure to disclose risks or conflicts of interest.

What are the most common types of stockbroker fraud?

Common types include Ponzi schemes, unauthorized trading, misrepresentation, and unsuitable investment recommendations.

How can I tell if my stockbroker is acting unethically?

Signs include unauthorized transactions, sudden changes in your portfolio’s performance, excessive fees, and a lack of transparency in communication.

Legal Grounds for Suing

What are the legal grounds for suing a stockbroker?

Legal grounds can include breach of fiduciary duty, negligence, fraud, misrepresentation, and breach of contract.

What is a fiduciary duty?

A fiduciary duty is the obligation to act in the client’s best interest, putting the client’s needs above the broker’s interests.

How do I prove my stockbroker breached their fiduciary duty?

Evidence may include documentation of unauthorized trades, lack of communication, or investments that don’t align with your financial goals and risk tolerance.

The Legal Process

How do I start a lawsuit against my stockbroker?

Start by consulting with a securities lawyer who is knowledgeable in investment fraud. They can help you file a claim with the Financial Industry Regulatory Authority (FINRA) or in court.

What is FINRA arbitration?

FINRA arbitration is an alternative dispute resolution process where neutral arbitrators hear both sides and make a binding decision.

What are the advantages of FINRA arbitration over court litigation?

FINRA arbitration is generally faster, less formal, and less expensive than court litigation.

Building Your Case To Sue Your Stockbroker

What evidence do I need to sue my stockbroker?

Gather documents such as account statements, trade confirmations, emails, and any written communications with your broker.

How important is documentation in these cases?

Documentation is crucial. It provides the evidence needed to prove your claims of misconduct or negligence.

Can expert witnesses help my case?

Yes, expert witnesses such as financial analysts can provide testimony to support your claims.

Potential Outcomes

What are the potential outcomes of suing my stockbroker?

Possible outcomes may include financial compensation for losses, attorneys’ fees and costs, and punitive damages.

How much compensation can I expect to receive?

Compensation depends on the extent of your losses and the severity of the broker’s misconduct.

Can I recover attorney’s fees and costs?

In some cases, you may be able to recover attorney’s fees and other legal costs.

Statute of Limitations / Rules of Eligibility

Is there a time limit for suing my stockbroker?

Yes, the statute of limitations varies by state but generally ranges from 2 to 6 years from the date of the misconduct or when it was discovered. FINRA will not hear a case outside of 6 years.

What happens if I miss the deadline?

You may lose your right to sue.

Hiring a Lawyer to Sue Your Stockbroker

Do I need a lawyer to sue my stockbroker?

While it’s not required, having an experienced securities lawyer greatly improves your chances of success.

How do I choose the right lawyer for my case?

Look for a lawyer with experience in securities law and a track record of successful cases against stockbrokers.

How much do lawyers charge for these cases?

Many securities lawyers work on a contingency fee basis, meaning they only get paid if you win your case.

During the Case

What happens after I file a claim?

The broker will have an opportunity to respond, and both parties will exchange information and evidence through a process called discovery.

How long does the process take?

The duration varies, but FINRA arbitration typically takes about 12-18 months from start to finish.

Can the case be settled out of court?

Many cases are settled through negotiation or mediation before reaching arbitration or court.

After the Case

What if I win my case?

If you win, the arbitration panel or judge will determine the amount of compensation you’re entitled to.

What if I lose my case?

If you lose, you may have limited options for appeal or filing a petition to vacate the arbitration award, depending on the circumstances of your case.

Can I sue my stockbroker again for a different issue?

Depends. Consult with an experienced securities lawyer.

Impact on Your Broker

Will my stockbroker face disciplinary action?

If found guilty of misconduct, your broker may face penalties such as fines, suspension, or revocation of their license.

Can I report my stockbroker to regulatory authorities?

Yes, you can file a complaint with FINRA, the SEC, or your state’s securities regulator.

Protecting Your Investments

How can I protect myself from future misconduct?

Stay informed about your investments, maintain open communication with your broker, and regularly review your account statements.

What should I do if I suspect misconduct again?

Act quickly by documenting your concerns and consulting with a securities lawyer.

Common Misconceptions

Can I sue my stockbroker if I simply lost money on an investment?

Not necessarily. Losses due to market fluctuations or poor investment performance alone are not grounds for a lawsuit. There must be evidence of misconduct or negligence.

Can I sue my stockbroker if they didn’t follow my instructions?

Yes, if your broker executed trades or made decisions without your consent, you may have grounds for a lawsuit.

Is it difficult to prove stockbroker misconduct?

While it can be challenging, a skilled lawyer can help gather the necessary evidence and build a strong case.

FAQs – Can I Sue My Stockbroker?

Can I sue my stockbroker if I signed an arbitration agreement?

Yes, an arbitration agreement means you’ll resolve disputes through arbitration instead of court, but you can still pursue your claim.

Can I join a class action lawsuit against my stockbroker?

If there are multiple victims of the same misconduct, a class action lawsuit may be an option.

What if my stockbroker is no longer with the firm?

You can still sue the broker and potentially the firm if it failed to supervise the broker adequately.

Can I sue my stockbroker for bad investment advice?

Yes, if the advice was unsuitable for your financial situation or risk tolerance and caused significant losses.

How does a contingency fee work?

A contingency fee means the lawyer only gets paid if you win, taking a percentage of the awarded amount.

Are there any risks in suing my stockbroker?

The primary risks include legal costs if you lose and the time and emotional investment required for the case.

What is churning, and can I sue for it?

Churning is excessive trading to generate commissions. Yes, you can sue if it caused significant financial harm.

Can I sue my stockbroker for recommending unsuitable investments?

Yes, if the investments were not appropriate for your financial goals and risk tolerance.

What is unauthorized trading?

Unauthorized trading occurs when a broker makes trades without the client’s consent.

Can I sue for unauthorized trading?

Yes, unauthorized trading is a serious violation and can be grounds for a lawsuit.

What is the role of an arbitrator?

An arbitrator is a neutral third party who hears both sides in a FINRA arbitration and makes a binding decision.

Can I appeal an arbitration decision?

Appeals are very limited in arbitration, usually only possible if there was evidence of bias or procedural errors. In arbitration, petitions to vacate the arbitration award are made when contesting the decision.

What is the difference between arbitration and mediation?

Arbitration results in a binding decision, while mediation is a facilitated negotiation to reach a mutual agreement.

How do I prepare for an arbitration hearing?

Work closely with your lawyer to gather evidence, prepare your testimony, and anticipate the broker’s defense.

Can I sue a brokerage firm for my broker’s misconduct?

Yes, firms can be held liable for failing to supervise their brokers properly.

What if my broker declares bankruptcy?

Even if a broker declares bankruptcy, you may still have recourse through the firm’s insurance or other legal avenues.

How can I find a reputable securities lawyer?

Research online reviews, ask for referrals, and consult with multiple lawyers to find one with the right experience and track record.

Suing your stockbroker can be a complex and daunting process, but with the right information and legal support, you can seek justice and potentially recover your losses. If you believe you have been a victim of stockbroker misconduct, don’t hesitate to consult with a securities lawyer to explore your options.

For more information and assistance, contact Bakhtiari & Harrison, where we focus on representing investors who have suffered due to stockbroker misconduct. We’re here to help you navigate the legal process and protect your financial future.