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.

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.

Can I appeal an arbitration decision?

Generally, you cannot appeal an arbitration decision. However, you can seek to vacate the award on very narrow grounds, such as arbitrator misconduct.

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 is the role of an arbitrator?

An arbitrator acts as a neutral decision-maker, reviewing evidence, hearing testimony, and issuing a binding decision on the dispute.

How do I prepare for an arbitration hearing?

Preparation involves gathering evidence, preparing witnesses, and developing a clear case strategy to present to the arbitrators.

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.

Investor Protection: The Case Against Aegis Capital

Introduction

In the intricate and often opaque world of financial markets, brokerage firms wield significant power and influence over retail investors. These firms are expected to act in the best interests of their clients, adhering to regulatory standards and ethical practices. However, as recent investigations have shown, some firms may exploit their positions, causing substantial financial harm to investors. One such firm is Aegis Capital, a brokerage firm known for its high-risk underwriting activities that have left a trail of financial devastation for countless retail investors.

At Bakhtiari & Harrison, we are dedicated to protecting investors. Our firm has a long-standing commitment to holding brokerage firms accountable for their misconduct and advocating for the rights of investors. We specialize in representing investors who have been harmed or misled by their financial advisors, ensuring they have a voice and the opportunity to recover their losses.

Aegis Capital

Aegis Capital has garnered a reputation as one of the highest-risk brokerage firms in the country. Its business model relies heavily on underwriting high-risk, often failing nano-cap stocks, which are typically small companies with low market capitalizations. These stocks are notoriously volatile and prone to rapid declines in value, making them unsuitable investments for many retail investors. Despite this, Aegis has consistently pushed these risky securities onto its clients, resulting in substantial financial losses.

According to a detailed investigation by Craig McCann and Mike Yan, Aegis Capital’s underwriting practices have caused between $3 billion and $5 billion in investor losses in recent years. The firm’s activities have been described as “farm-to-table securities fraud,” highlighting the systematic nature of their misconduct. In their latest report, McCann and Yan provide evidence of Aegis’s ongoing harmful practices, further emphasizing the urgent need for action.

Prior Findings

A previous investigation into Aegis Capital found the firm to systematically underwrite failing nano-cap stocks, resulting in significant losses for investors. One notable example is Meten, where an unexplained one-day spike in stock price facilitated Aegis’s underwriting, leading to severe investor losses. Similarly, in the case of SeaChange International, Aegis’s manipulation of closing prices to facilitate underwriting was evident, resulting in a dramatic decline in stock value shortly after the offering.

The investigators also highlighted the practices employed by Aegis and the issuers they underwrite. These practices include marking the close to artificially inflate stock prices and gaming dilution disclosures about the true financial health of the companies. Such tactics may erode investor trust and may also contribute to substantial financial losses.

Ongoing Investor Harm in 2024

Despite the damning evidence from previous investigations, Aegis Capital has continued its practices unabated in 2024. Between mid-February and the end of May 2024, Aegis underwrote nine offerings totaling $95 million for eight issuers. As is typical with Aegis’s underwritten issuers, these companies were small, failing firms that posed significant risks to retail investors.

Among the recent offerings, six issuers had previously been underwritten by Aegis with disastrous results. The pattern of substantial stock price declines continued, with cumulative losses reaching as high as 99.99% for some issuers. The following sections detail the performance of specific companies underwritten by Aegis in 2024, illustrating the extent of investor harm.

Applied UV

Applied UV is a stark example of the devastating impact of Aegis’s underwriting activities. Over the past two years, Applied UV’s stock price has plummeted by 99.99% while Aegis was underwriting its securities offerings. Despite the significant decline in stock value, Aegis continued to underwrite additional offerings, leading to further investor losses.

BYND Cannasoft Enterprises

BYND Cannasoft Enterprises experienced a similar fate. Since Aegis began underwriting its securities, the stock price has dropped by 99.92%. The company’s financial health was already precarious before Aegis’s involvement, and the subsequent offerings only exacerbated the decline, causing substantial losses to investors.

C3is

The case of C3is highlights the rapid and severe impact of Aegis’s underwriting activities. Within a year, C3is’s stock price dropped by 99.92%, with substantial declines occurring after each underwriting by Aegis. The firm’s continuous involvement with such failing companies underscores the systemic nature of the problem.

Cemtrex

Cemtrex’s stock price decline of 99.7% while underwritten by Aegis further illustrates the firm’s reckless underwriting practices. Despite the evident risks, Aegis continued to facilitate securities offerings for Cemtrex, leading to devastating losses for investors.

Cyngn

Cyngn’s stock price has fallen by 98.7% since Aegis began underwriting its offerings. The consistent decline in stock value reflects the high-risk nature of the companies Aegis chooses to underwrite and the consequent financial harm to investors.

Sunshine Biopharma

Sunshine Biopharma’s stock price has dropped by 99.99% while Aegis was underwriting its securities offerings. The repeated underwritings despite the company’s failing performance demonstrate Aegis’s disregard for investor protection.

Flora Growth

Flora Growth, a first-time issuer underwritten by Aegis in 2024, saw its stock price drop by 77.5% in the past two years. The rapid decline following Aegis’s involvement is consistent with the pattern observed in other underwritten issuers.

Serve Robotics

Serve Robotics experienced an 88.5% decline in stock price within three months of being underwritten by Aegis. The substantial loss underscores the high-risk nature of Aegis’s underwriting activities and their detrimental impact on investors.

How Bakhtiari & Harrison Can Help

At Bakhtiari & Harrison, we specialize in representing investors who have been defrauded or misled by their financial advisors. Our experienced team of attorneys is committed to holding brokerage firms accountable for their misconduct and ensuring that investors have the opportunity to recover their losses. Here’s how we can help:

Case Evaluation and Consultation: We offer a thorough evaluation of your case to determine the extent of misconduct and the potential for recovery. Our team will review all relevant documents, including account statements, transaction records, and communications with your broker, to identify evidence of fraud or mismanagement.
FINRA Arbitration: The Financial Industry Regulatory Authority (FINRA) provides a forum for resolving disputes between investors and brokerage firms. We have extensive experience representing clients in FINRA arbitration, from filing the initial claim to presenting evidence and arguing your case before the arbitrators. Our goal is to achieve the best possible outcome for our clients. If you need a dedicated FINRA securities attorney, Bakhtiari & Harrison is here to help.
Litigation: In cases where arbitration is not an option or additional legal action is necessary, we are prepared to litigate on behalf of our clients. Our attorneys have a proven track record of success in court, fighting for the rights of investors and securing favorable outcomes.
Expungement of U5 Language: For financial advisors who have been wrongfully terminated, we assist in expunging negative language from their U5 forms and changing the termination status to voluntary. This can help protect your professional reputation and future career prospects.
Elder Abuse Claims: Many states, including California, have elder abuse statutes designed to protect senior citizens from financial exploitation. We are dedicated to representing senior investors who have been defrauded, seeking compensation for their losses and holding those responsible accountable.
Investor Education: We believe in empowering investors with knowledge. Through our marketing blogs and other educational resources, we aim to inform the public about their rights and the steps they can take to protect themselves from unscrupulous brokers.

Conclusion

Aegis Capital’s underwriting of high-risk, failing nano-cap stocks has caused billions of dollars in losses for retail investors. Despite previous investigations and the clear pattern, Aegis continues its harmful practices unabated. The urgent need for regulatory intervention cannot be overstated. Without decisive action, Aegis may continue to cause further financial devastation.

At Bakhtiari & Harrison, we are committed to advocating for the rights of investors and holding brokerage firms accountable for their misconduct. Our firm has extensive experience in representing investors who have suffered losses due to the unethical practices of brokerage firms. We understand the complexities of these cases and are dedicated to securing justice for our clients. If you need a FINRA securities attorney to help recover your losses, we are here for you.

If you or someone you know has suffered financial losses due to the actions of Aegis Capital or any other brokerage firm, contact Bakhtiari & Harrison today. Our team of experienced attorneys is here to help you navigate the legal process and recover your losses. Together, we can hold these firms accountable and protect the rights of investors.

For more information, visit our website at www.bhseclaw.com.