Posted By user, Uncategorized On October 19, 2020


Are investors claiming they suffered losses due to your bad advice?

Every day, investors lose hard-earned money due to faulty advice from broker-dealers, brokerage firms, or other financial advisors. While many losses can be attributed to the market, in some cases losses can be attributed due to a financial-advisor’s failure to disclose risks, or some other negligence on the part of the advisors.

When an investor suffers a loss, that investor MAY be entitled to recover these damages. In situations like this, FINRA may get involved. FINRA regulates securities firms that do business in the USA, with the mission to protect investors. If you are a financial advisor, and are being investigated by FINRA – it might help to speak to our FINRA arbitrations lawyers.

Financial Advisor / Broker Actions Which Could Result in FINRA Rule Violations

Common examples of broker misconduct include, but are not limited to:

Breach of Contract: There is a violation in the terms of the customers agreement which outlined the obligations of the broker, or advisor.

Breach of duty: Financial advisors puts their own financial interests over the interests of their client

Churning: Encouraging a client to participate in unnecessary trades to generate massive fees for the brokerage

Failing to disclose risk: Failing to inform the client of an investment risk and potential financial loss

Failure to supervise: Brokerage firm doesn’t supervise its brokers, advisors, and allows misconduct to happen

High-pressure: Implementing sales tactics and pressuring clients to RUSH their investment decision process

Misrepresenting: Presenting false claims and false facts, and mischaracterized the investment

Negligence: Failing to handle in a reasonable manner, or failing to comply with rules

Unauthorized: Failing to get a client’s consent before trading

What’s the FINRA arbitration process?

Investor claims against financial advisors, etc, are filed with FINRA. The arbitration process isn’t very formal, and goes much faster than a lawsuit in court. Decisions are final and very rarely are they appealed.

Step 1: Statement

The clients attorney will prepare  statement of claim, which discusses the activity conducted which led to the financial loss. The financial institution responsible has 45 days to file an answer.

Step 2: Panel

Both parties will agree on FINRA arbitrators who preside over the proceeding. If the dispute involves over $100,000 in losses then 3 will be selected. For claims ranging from $50,000 to $100,000 in losses, 1 is selected. For claims less than $50,000 – FINRA will handle the claim based on your legal briefs alone.

Step 3: Discovery

Your FINRA arbitration attorney could ask for documents from the brokerage/financial advisor. The Investor will typically produce things like account statement, their receipts, or other documents. Depoisitions and other discovery aren’t usually allowed in FINRA arbitrations.

Step 4: Hearing

If the dispute involves more than $50,000 in losses, then the clients FINRA arbitration attorney will attend a hearing before a panel of FINRA arbitrators. This consists of an opening statement, evidence, witness, evidence presentation, cross-examination, and closing statements. A decision is made in 30 days. Appeals are rare and only granted if there is clear errors in the laws/facts by the panel.

Typically the entire process is done in 12-18 months.

These decisions are final, and appeals are rare.