Frequently Asked Questions

The Financial Industry Regulatory Authority (“FINRA”) operates the largest securities dispute resolution forum in the country where investors can file an arbitration claim when they have a dispute involving the business activities of a brokerage firm or one of its brokers. Arbitration is similar to filing a lawsuit in court, but it is typically faster and cheaper than a court case.

An investor initiates an arbitration by filing a Statement of Claim which lays out the basis for the investor’s complaint and the relief being sought. After the brokerage firm or broker receives the Statement of Claim, they are given an opportunity to file an Answer which lays out their “side of the story” and all applicable defenses. Thereafter, the parties select a neutral third party, called an arbitrator, to ultimately resolve the dispute.

The amount of an investor’s claim determines the number of arbitrators and the hearing process. Claims involving more than $100,000 require an in-person hearing decided by three arbitrators. Claims under $100,000 are decided by one arbitrator, while claims under $50,000 can be decided by the lone arbitrator without a hearing and solely on the submitted written materials. After the parties conduct the in-person hearing before the arbitrators (which is similar to a trial, but less formal), the arbitrators issue the decision, called an award.

Most brokerage account agreements contain pre-dispute arbitration clauses which preclude customers from pursuing nearly all their investment-related claims in court. Instead, the agreements require customers to pursue their claims against the brokerage firm in binding arbitration, typically in FINRA’s dispute resolution forum. If you choose to file a lawsuit in court instead of arbitration with FINRA, the brokerage firm can petition the court to enforce the brokerage account agreement and compel the matter to arbitration.

Each case is different, but it can typically take approximately 15-18 months from the date the Statement of Claim is filed to conduct an in-person hearing and for an award to be determined.

Yes. A matter can be resolved by the parties at any time prior to (or during) the FINRA arbitration hearing. There is no requirement that the parties must proceed with the arbitration hearing if they reach a settlement. Often times, disputing parties will attend mediation where they engage the services of a trained, impartial mediator to assist the parties in finding a mutually agreeable solution. Mediation is a voluntary process.

No, the arbitrator’s decision is final and binding. By agreeing to arbitrate a claim, a party cannot have the same matter decided by a court of law. However, a party can seek to have a court vacate a FINRA arbitration award (similar to an appeal), but the grounds to do so are very limited.

While it is often quite difficult for an investor to determine if he/she has been the victim of investment fraud, an investor may want to speak with a trained securities attorney if they see any of the following red flags in their account:

  • There is unusual trading activity in the account (such as the number of trades or the type of securities purchased);
  • The customer reviews monthly statements and does not recall discussing the securities in the account before the trades were executed;
  • The broker is non-responsive to a customer’s contact attempts to discuss the portfolio, especially if the portfolio is not performing well;
  • The overall market is performing well, but the investor's investments are losing money;
  • The broker fails to disclose the risks and fees (including his/her commission) associated with a recommended investment; and
  • The broker recommends the same securities to his clients regardless of each customer’s unique investor profile.

If a customer suspects that they may be the victim of investment fraud, it is best to contact an experienced securities attorney as soon as possible who can review the trading activity in the accounts and determine if the customer may have an actionable legal claim. The attorneys at Gregory B. Simon Law have significant experience handling investment fraud claims throughout the country. Please contact us for a free, confidential consultation. Most investment fraud claims are handled on a contingency-fee basis.

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