The attorneys at Morgan & Morgan represent defrauded investors in arbitration proceedings before the Financial Industry Regulatory Authority (FINRA).
In most cases, our clients suffered investment losses after their financial advisors failed to disclose the risks associated with a particular investment, recommended frequent trades for the sole purpose of generating commissions or used high-pressure tactics to make a sale. Through FINRA arbitration, our attorneys help investors recover lost money, securities and other damages resulting from their brokers’ misconduct.
Because decisions in FINRA arbitrations are final and can only be appealed in limited circumstances, it is important that your attorney understands the complexities of the securities industry, as well as the intricacies of the procedural rules that govern FINRA arbitrations. At Morgan & Morgan, our attorneys have years of experience representing defrauded investors and have successfully taken on some of America’s largest financial institutions. If you’ve suffered investment losses that may have been caused by your financial advisor’s negligence or fraud, contact us today to learn more about how we can help.
What Is FINRA?
FINRA is a non-governmental organization authorized by Congress to regulate brokerage firms and the securities industry. Most agreements between investors and their financial advisers contain mandatory arbitration agreements. Under the terms of these arbitration agreements, investors are generally prohibited from suing their financial advisers in a court of law and must instead file an arbitration claim with FINRA. Prior to 2007, FINRA was referred to as National Association of Securities Dealers (“NASD”).
How Does the FINRA Arbitration Process Work? What Does My Attorney Do?
Arbitration is similar to a legal proceeding in court, but is less formal and is intended to be quicker and less costly than filing a lawsuit in a court of law. During the FINRA arbitration process, your attorney may:
Draft and File a Statement of Claim: To start the FINRA arbitration process, your attorney will draft a “statement of claim.” The statement of claim will describe how your broker’s fraud, negligence or misconduct caused you to lose money. The investment firm has 45 days to respond to the allegations contained in the statement of claim and file an answer.
Select Arbitrators: After your attorney has filed the statement of claim with FINRA, either one arbitrator or a panel of three arbitrators will preside over the proceeding. The parties must agree on the selection of the arbitrators. If either side objects to a proposed arbitrator, the arbitrator is ineligible to participate.
If the dispute involves more than $100,000 in alleged damages, the panel will be comprised of three arbitrators. One arbitrator presides over claims involving alleged damages of $50,000 to $100,000. For claims involving alleged damages of less then $50,000, FINRA adjudicates the claims based solely on the legal briefs filed by the attorneys working on the case and does not hold a hearing.
Conduct Discovery: In general, discovery in FINRA arbitration is limited and depositions and interrogatories are not allowed. As part of the discovery process, your attorney may request documents from the brokerage firm relating to the allegations contained in the Statement of Claim. You may be required to produce documents as well, such as brokerage statements and any correspondence you received from your financial advisor. The brokerage firm may be required to hand over any other complaints that have been filed against the broker.
Represent You at a Hearing: During the hearing, your attorney may make an opening statement, question witnesses, present evidence, cross examine any witnesses called by the investment firm and make a closing argument. All witnesses are required to testify under oath.
In general, FINRA will issue a decision within 30 days of the end of the hearing. The decision of the arbitrator(s) is binding on the parties. Appeals of arbitration decisions are only granted in limited circumstances, such as when the decision reflects a clear error of law or fact.
How Long Does FINRA Arbitration Take?
An arbitration before FINRA is less formal than a trial in a court of law and usually results in a speedier decision. In general, FINRA arbitration takes about 12 to 18 months to resolve after the Statement of Claim has been filed.
Common Claims Against Brokers and Financial Advisors
Our securities arbitration attorneys represent clients in all types of matters involving broker misconduct, including allegations of:
Breach of Fiduciary Duty: Breach of fiduciary duty claims arise when a broker or registered investment advisor violates a client’s trust and confidence. Financial advisors have a duty to put their clients’ best interests before their own financial interests. If your broker has violated this duty, our investment fraud attorneys may be able to help you recover compensation for your losses.
Negligence: If your broker or financial advisor failed to comply with industry standards or failed to act how a reasonably prudent investment advisor would have acted under similar circumstances, our attorneys may be able to help you file a negligence claim.
Misrepresentations, Omissions and Failure to Disclose Risk: Misrepresentation claims often involve financial advisors who misrepresent or fail to properly describe the risks associated with a particular investment option. For example, if your broker recommends that you invest in stock options or other derivative products without first informing you that such investments are extremely risky and can result in the loss of 100% of your principal, your broker may be held liable for the losses you suffered.
Churning: Churning occurs when a broker encourages a client to make excessive and unnecessary trades to generate extra commissions or fees.
Unsuitability: A financial advisor has a duty to know a client’s appetite for risk and to only make investment recommendations that are suitable for the level of risk the client is willing to accept. If a financial advisor recommends that a client invest in a stock, bond, mutual fund or other financial product that does not conform to the client’s level of risk tolerance, the client may be able to seek legal recourse through a FINRA arbitration.
High Pressure Sales Tactics: A broker may be held liable for using high-pressure sales tactics if he or she is offering to sell securities to a client by means of an aggressive sales campaign to induce a hasty decision to buy the security. For example, if a broker stresses the urgency of the investment and the need to take immediate action, creating the impression that the client will miss a great investment opportunity if he or she does not act immediately and invest in the securities, the broker may be held liable for any losses the client suffers.
Unauthorized Trading: Unauthorized trading occurs when a financial advisor makes a trade in a client’s account without first obtaining the client’s permission or consent. It is important to note that unauthorized trading can occur in cases involving a discretionary account (an account where the broker has discretion to make trades without first receiving client approval) if the client limited the scope of the broker’s authority and the broker exceeded those limits.
Failure to Supervise: A brokerage firm has an obligation to properly supervise its brokers. You may have a valid claim for damages if you suffered losses because of your brokerage firm’s failure to properly supervise its staff, especially if your broker or financial adviser has a record of prior misconduct or improprieties.
Breach of Contract: When you open an account with a financial services firm, the investment advisor will most likely require you to sign a customer agreement outlining the legal obligations between you and your broker. If your broker violates the terms of this agreement, our attorneys may be able to help you obtain compensation for any damages that occurred as a result of the breach of contract.
If you believe that your broker has engaged in any of the above-described activities and you would like Morgan & Morgan’s investment fraud office to evaluate whether you have a claim against your broker or financial adviser, contact us today.
Commodities and Futures Arbitration Attorneys
If you are a commodities or futures investor who has been the victim of broker fraud or negligence, our securities attorneys may be able to file a complaint on your behalf with the National Futures Association (“NFA”). In general, a claim form or notice of intent to arbitrate must be received by the NFA within two years from the date the claimant knew (or should have known) of the act or transaction that is the subject of the arbitration. Similar to FINRA arbitrations, NFA arbitration decisions are final and can only be appealed in limited circumstances.
How Much Does an Investment Fraud Attorney Cost?
Morgan & Morgan’s FINRA arbitration attorneys work on a contingency-fee basis, which means your attorney will only receive a fee if he or she is successful in obtaining compensation for your losses. Contact us today for a risk-free, no-cost case evaluation.
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