What is FINRA?

FINRA is the main regulatory agency in the United States that protects investors’ rights and ensures broker integrity. FINRA is overseen by the U.S. Securities and Exchange Commission (SEC), but it is a non-profit and non-governmental body. The agency’s primary goal is to ensure that the financial markets in the United States are running smoothly and fairly.

Some of FINRA’s key responsibilities include educating investors, implementing and enforcing ethics guidelines for all registered brokers and broker-dealers, and ensuring that brokers and firms comply with these ethics rules. In 2020, FINRA brought over 800 disciplinary actions against registered brokers and brokerage firms for inappropriate and unethical behavior. These resulted in more than $57 million in fines and $25 million in restitution paid to investors.

What is a FINRA Dispute?

A FINRA dispute generally involves complaints related to brokerage misconduct, fraud, and negligence. FINRA’s Dispute Resolution Program is an alternative dispute resolution process designed to report fraud and help investors recover funds.

A FINRA dispute is similar to the court process, but it is generally faster and cheaper, with complaints resolved in 16 months or less. Like a court case, you would need to file certain documents in support of your claim, and you would have the option to enter witness testimony and other kinds of evidentiary support into the record. You and the other party would be required to sign the FINRA Submission Agreement to ensures you agree with the outcome of the arbitration.

While both processes are similar, you would not have all of the same rights and requirements as a hearing in a court of law. Instead, a FINRA dispute is heard by a panel of three arbitrators, or by one arbitrator, depending on the size and complexity of your claim. You have the right to request a hearing from FINRA arbitrators, as well as to strike arbitrators in case of a conflict.

It is important to note that FINRA arbitration is not the same as engaging legal counsel. FINRA staff members cannot offer legal representation or advice to either party involved in a dispute. Only a FINRA arbitration lawyer can ensure that you receive legal advice during your FINRA arbitration or in court.

Who Are the Most Common Victims of Investment Fraud?

Anyone who invests in the stock market may be a victim of broker misconduct and fraud. Research shows that investment fraud is a significant problem in American markets. A 2016 study from The Wharton School estimates that around 10% of investors will be victimized by investment fraud at some point in their lives. FINRA data shows that people who have been targeted once by investment fraud are more likely to be retargeted in the future, often for different kinds of scams.

Some of the triggers for investment fraud occur when people experience significant changes to their wealth and portfolio, such as when they sell a house or inherit money from the loss of parents or a relative. While fraud can happen to anyone, often people who are taken in by unethical brokers are passive investors who don’t regularly review their brokerage account statements. It may take longer for such investors to realize that fraud is taking place, and some may never recover their losses.

Elderly investors who have built up a lifetime of retirement savings are also often targets of unscrupulous brokers. In fact, elder abuse in investing has become a focus area for state and federal regulators. If you are a senior citizen who believes you have been the victim of broker fraud, our FINRA attorneys can help you understand your legal options. You can also get answers to your questions and report concerns about potential broker fraud at the FINRA Securities Helpline for Seniors. Remember, though, everyone of any age who invests can become the victim of stockbroker fraud. All investors should carefully monitor their accounts for any unusual and potentially fraudulent activity.

Types of Fraud a FINRA Lawyer Can Help With

Some of the most common types of negligence, scams, and misconduct that our investment fraud attorneys can help you address include:

• Failure to supervise. Brokerage firms may be liable if they failed to properly supervise or train a broker who commits a violation.
• Misrepresentation and/or omission. Misrepresentation is when a stockbroker intentionally withholds material information or provides investors with misleading information in order to influence an investment decision.
• Excessive trading. Excessive trading, also known as churning, is when brokers over-trade in investors’ accounts in order to generate commissions for themselves on each trade.
• Failure to diversify. To avoid undue risk, investment portfolios should be diversified across businesses, industries and product types. When they are not and investors lose money, brokers may be liable for a failure to diversify.
• Selling away. Selling away is when a stockbroker sells investments, often high-risk ones, that are not approved or offered by their brokerage firm.
• Unauthorized trading. Unauthorized trading occurs when brokers make trades in nondiscretionary accounts without the authorization of the investors.
• Unsuitable investment recommendations. When brokers recommend investment opportunities that are not aligned with the investment objectives and risk tolerance of their customers, those unsuitable investment recommendationsmay be evidence of fraud. Examples include recommending high-risk opportunities to older investors who are risk averse, or failing to provide appropriate growth recommendations to more hands-on clients.

In the event that you are unsure whether you’ve been defrauded by your broker, you can bring your financial records and other relevant documents to one of our FINRA lawyers who can assist you with your case.

Filing a FINRA Complaint

Even if you have noticed a considerable loss in your portfolio, you may simply think that it was part of the risk you took in investing in the first place. This may be true in some cases, but you should be able to count on your stockbroker to avoid such losses wherever possible. When they fail to do so through negligence or improper investment strategies, they can be held accountable with help from an investment fraud lawyer.

Some stockbrokers will make poor decisions surrounding your investments if it means they’ll see considerable personal financial gains, so you should be prepared to bring them to justice for this type of misconduct. In order to begin the FINRA investigation process and file your FINRA claim you need to:

1. Collect all relevant documentation relating to the complaint

Create an investment fraud file including the name, contact information, and FINRA license number of your broker. You will want to create a complete timeline of any transactions, financial statements, and records of loss. You should include directives you have given your broker, as well as communications that you’ve had about your finances, whether via email or text message. You should also include your most recent credit report from major credit reporting bureaus to contextualize your claim, as well as any contact you have had previously with FINRA or law enforcement agencies.

2. Speak to your broker about the fraudulent transaction

It is in your best interests to try to communicate with your broker about the transactions that are causing you concern. This way you can gain better understanding of whether or not the loss was genuine, as well as have a paper trail of your complaint.

3. If unsatisfied, file an internal complaint

Filing an internal complaint with the brokerage firm can showcase FINRA compliance, i.e. you have taken all necessary steps to resolve the issue. It can also help circumvent FINRA mediation in some cases, if the brokerage firm is able to take steps to discipline the broker in question.

4. File a complaint with the law enforcement

Federal and some state regulations govern investment fraud cases. Apart from reporting your loss to SEC regulators, you should reach out to your local law enforcement to file a police report. Your District Attorney and your state’s Attorney General Consumer Protection Unit may also be able to escalate your concern and create a record for future malfeasance.

5. Explore your legal options with a FINRA lawyer

An investment loss attorney can help you understand what path forward is right for your claim, and what possibilities are available to you to recover what has been lost.

While a civil lawsuit is an option in some cases where extensive fraud has occurred, they can take longer than the FINRA arbitration process. Investment fraud lawyers are also qualified to represent you throughout the mediation and arbitration avenues, and can ensure your claim follows the FINRA compliance requirements for recovery.

What to Expect From Your FINRA Arbitration Hearing

Your FINRA arbitration hearing will take place before either a single arbitrator or a panel of three arbitrators, depending on how sizable your losses were. The higher your losses, the greater the likelihood that a panel of three arbitrators will be necessary.

An arbitration hearing is quite similar to going to court in that both parties have the chance to present their version of events. You will be able to make a statement, present evidence demonstrating the losses you endured, and have witnesses testify for you. These can be both individuals who speak about the facts of the case, known as fact witnesses, and expert witnesses, if appropriate.

The other party will also be given the same opportunity to defend themselves.

Once the arbitrators have heard both parties plead their case, they will retire to deliberate and review the evidence of the case. From beginning to end, it could take as long as 16 months to hear a decision and to obtain an award if your claim is a success. If the arbitrator’s decision comes down in your favor, the responsible party will have up to 30 days following the decision to get your settlement to you.

Failure to do so can result in additional sanctions by FINRA and legal action on the part of your attorney, should it become necessary.

How Can a FINRA Lawyer Help Me?

Investors who have reason to believe that their stockbrokers or financial planners have wronged them in some way, causing them large stock and investment losses that could have been prevented if it hadn’t been for the misconduct of these individuals and/or corporations, have options. Those investors can file complaints with FINRA and potentially be awarded repayment of their losses through arbitration or mediation. But knowing whether your losses were due to broker misconduct or negligence isn’t always easy. Experienced FINRA attorneys know the types of dishonest schemes that brokers use to defraud investors. Our FINRA attorney can help you understand whether you have been a victim of an unscrupulous stockbroker. If you have been, we can help you hold them accountable for their actions.

It is also important to understand that the FINRA securities arbitration process does not include the possibility of an appeal. Both parties are required to abide by the final decision of arbitrators, although in some limited cases an award can be vacated. Because of this, if you do not have proper legal representation, you may miss out on a larger claim for monetary damages, or settle for less than your claim is worth.

Remember, the broker or brokerage firm that you are up against has received specialized training in regulatory codes and FINRA compliance. When you are attempting to prove a claim for misconduct or negligence, you need a highly qualified expert to effectively present your case and ensure you have the best chance of recovery.

FINRA Lawyer: FAQs

Filing a FINRA complaint can be overwhelming, and the thought of having to bring your case before a panel of arbitrators may be intimidating. We’ve seen firsthand just how difficult it can be to gather up the courage to fight for the money that is rightfully yours. Here are some frequently asked questions on some of the most common concerns surrounding FINRA complaints and what to expect if you choose to move forward with your arbitration claim.

1. Is FINRA arbitration mandatory?

No. FINRA arbitration is an optional process to help recover lost or misappropriated investment funds. You can file a complaint with an SEC regulator without undergoing FINRA arbitration. You can also circumvent FINRA arbitration by filing a lawsuit. An investment fraud attorney can ensure that your claim qualifies and work with you to recover lost funds.

2. What is the success rate of FINRA arbitration?

Approximately 69% of FINRA broker complaints result in settlements, and 18% of cases end in a consumer award.

3. Is there a way to recover my losses without going before FINRA?

Going to mediation is an excellent option if you want to avoid a hearing, and filing a lawsuit could be another option. The potential downsides to these methods is that a mediation settlement may not result in a full recovery of your losses, and a lawsuit can take years to resolve. FINRA arbitration is often the most likely to deliver the results you are looking for. Not only could you possibly recover full compensation for your losses, but you will have the opportunity to hold the liable party accountable for their misconduct, thus decreasing the chances that another investor will suffer damages as a result of the same irresponsible stockbroker or brokerage firm.

4. What is FINRA BrokerCheck?

FINRA BrokerCheck is a verified resource to review a broker’s history online. You can check individual brokers, as well as their brokerage firms, and see if they have previously been disciplined for negligence or fraud. Other options to find similar information include the SEC Check Your Investment Professional tool, as well as the North American Securities Administrators Association (NASAA) Contact Your Regulator.

5. How long does a FINRA investigation take?

The process will take anywhere from one year to 16 months, on average. In smaller cases involving claims of $50,000 or less, the process can be condensed into several weeks or months, and may be conducted telephonically or through a “paper hearing“, where the arbitrator comes to a conclusion solely from documentation submitted.

6. How do I file a FINRA lawsuit?

Investment disputes that come to FINRA are settled through arbitration (or mediation), not through a civil lawsuit. However, in some cases, investors may wish to file lawsuits through the courts rather than going to FINRA arbitration. But if you have signed an arbitration agreement with your brokerage firm, you probably will not be able to resolve your claim through a lawsuit in civil court. If you haven’t signed an agreement, our FINRA attorneys can help you explore your options for pursuing restitution to see what makes the most sense for your situation.

7. What is the statute of limitations for filing a FINRA arbitration claim?

FINRA mandates that any complaints must be filed within six years of the date of the incident in question. If you did not discover a stock loss, investment loss, or other situation involving stockbroker misconduct until after the incident occurred, the six-year deadline may not begin until the discovery date. Unfortunately, if your FINRA complaint is not filed within six years, in most cases you will lose the chance to be awarded the compensation you might have otherwise won. If you believe you may have been the victim of stockbroker misconduct, don’t wait to speak with an attorney about filing a FINRA claim.

8. How does FINRA mediation work?

In FINRA mediation, an impartial and trained mediator helps brokers/brokerage firms and investors resolve disputes and reach settlements. Mediation is an informal process in which neutral mediators work to facilitate communication between the parties. Mediators do not make resolution decisions themselves, but instead encourage parties to reach agreements that are mutually acceptable. For mediation to occur, both sides must agree to it. Mediation can take place before arbitration or even during the arbitration process.

9. Do I have to hire an attorney to file a FINRA complaint?

No — you don’t have to hire an attorney to file a complaint. If you believe your broker defrauded you and you want to report it to help protect other investors, you can file a complaint online with FINRA. Through an online FINRA complaint, you can initiate an investigation of your broker and/or the brokerage firm; if violation is found, FINRA will take appropriate actions against them. These actions could include fines, suspensions and even barring the broker from the industry.

However, simply filing an online complaint with FINRA will not result in your getting your money back. To have a chance at getting compensation, you will have to take your claim to arbitration and/or mediation through FINRA. While you aren’t required to hire an attorney to arbitrate your case before FINRA, you stand a better chance of a favorable outcome if you do. Experienced FINRA attorneys understand what type of evidence is needed to prove fraud by stockbrokers and how to present the evidence to convince arbitrators in your favor.

We cannot guarantee that an arbitration hearing will go your way — no attorney can. However, when you work with our FINRA lawyer, you can be sure that your case will be handled knowledgeably and professionally. Because, as previously stated, an arbitration decision cannot be appealed, it is to your great benefit to put your case in the best possible position for success. Our attorney has a greater than 95% success rate in recovering compensation for investors.

10. In addition to paying me restitution, how else will my stockbroker be held accountable?

If your broker is found guilty of investment fraud, in addition to paying you restitution, your stockbroker could lose their broker’s license and certifications. Stockbrokers who commit fraud may also face jail time and hefty criminal fines to punish them for their wrongdoing. If you lost significant money in an investment and believe it was due to intentional fraud or negligence, contact our FINRA attorney for legal guidance today.

11. Can I appeal a FINRA arbitration decision?

No, you cannot. When arbitrators issue a decision, the decision is final and is not able to be appealed. For this reason, many wronged investors will start off by going to mediation in the hopes of obtaining a settlement prior to going to arbitration. If mediation is unsuccessful, the next step is arbitration. Arbitration is typically less expensive, and decisions are generally issued more quickly than they would be if you tried to file a lawsuit against a crooked broker in the courts, which usually makes arbitration the more attractive option overall for investors who have suffered significant losses.

Don’t Wait When You Suspect Fraud: Reach Out to our FINRA Lawyer at Wolper Law Firm

You’ve worked hard for the money you invest. When you trust a stockbroker and brokerage firm to ethically and honestly handle your investments so that you can have a comfortable retirement or reach another important goal, learning that you’ve been defrauded of a large amount of money is devastating. It can bring all of your plans to a screeching halt… potentially forever.

Our FINRA attorneys want to help you get your money back, whether through FINRA arbitration, FINRA mediation or a legal claim. We also want to hold unscrupulous brokers accountable for their actions. While many stockbrokers are honest individuals who sincerely want to help their clients grow their investments, the fair share who are negligent or dishonest negatively affect the reputation of the entire securities industry, as well as potentially ruining their clients’ financial lives. If you’ve lost a substantial amount of money and suspect it was due to broker misconduct, don’t wait to take action. The sooner you act, the faster you may be on the road to recovery.

Pursuing arbitration through FINRA is often the best way to ensure that you are fully compensated for the losses you took due to broker negligence or misconduct. You may also have other options for getting your money back, depending on the details of your case.

Our attorneys at Wolper Law Firm, P.A. handle FINRA claims and other investment fraud cases for clients throughout the country. We can be reached seven days a week. Call us at 855.291.2720 or use our contact form today.