Investment brokers are required to treat clients with honesty and integrity. While investors are shaken by those who abuse, mislead, or steal from clients, broker misconduct occurs all too often.
If you have been the victim of investment broker misconduct, you need to be represented by an attorney with the knowledge, skill, experience, and expertise. An experienced financial attorney can file a claim with FINRA for you.
What is FINRA?
FINRA stands for Financial Industry Regulatory Authority. FINRA, or Self-Regulatory Organization, is a self–regulating organization. A self-regulating organization (SRO), FINRA is a nonprofit corporation that works with the Securities and Exchange Commission in order to protect investors from wrongdoing by brokerage firms. FINRA offers investment broker certification through professional exams. It offers continuing education to investment professionals in order to promote fairness, transparency, and integrity in the securities market.
FINRA is authorized to create rules and regulations that regulate broker-investor relations. It can take action to discipline brokers who are guilty of misconduct. FINRA also educates investors on their investment goals, strategies, and safe investing.
Arbitration through FINRA can be the best way to get full repayment for losses suffered by a stockbroker that you trusted with your investments. This is often less expensive and quicker than going to court.
It can be daunting to file a claim before FINRA in order to have your broker, financial planning corporation, and/or brokerage firm taken on by them. Working with a skilled FINRA lawyer can increase your chances of a positive outcome.
Statute of Limitations for FINRA
Investors who file a complaint against a broker or brokerage firm can benefit from mediation and arbitration services from FINRA. The arbitration board at FINRA must be notified within a certain time frame by the victim investor. Investors who are considering pursuing legal action to recover their losses must be aware of any other deadlines.
Deadline for FINRA Arbitration
FINRA’s procedural guidelines state that investors have six years in which to bring a claim for arbitration. The six-year period begins when the legal claim was made. FINRA will reject any claim that is not within the eligibility period. If the parties disagree about whether the eligibility deadline has passed, the arbitration panel will decide eligibility.
If the case is filed in court, FINRA will stop or reduce the eligibility period. FINRA’s procedural rules also state that courts will not apply the statute of limitations if the case is still under FINRA’s control.
Statute of Limitations Concerns
FINRA’s arbitration eligibility regulations differ from state or federal statutes of limitations. Investors who are aggrieved at the broker’s actions must realize that they don’t have six years to file a claim in court. In many cases, the statutes are shorter than FINRA’s arbitration eligibility period.
Investors have the right to sue their broker/advisor for fraud or other unfair practices under Section 10(b), Securities and Exchange Act of 1934 and regulations. You can find section 10b and the regulations at 17 C.F.R. The statute of limitations for sections 240.10b-5 and 240.10b-5 is two years.
These rules stipulate that the statute of limitations is two years from the date the investor discovers fraud or not more than five years after the alleged fraud.
It is important to know the date when the investor discovered that the fraud was committed. You could unwittingly let the statute of limitations expire before you have a chance to file your claim. The statute of limitations begins when an investor knows or should know about fraud.
To uncover evidence of fraud, you must first understand the nature and operation of your investments. To protect your investment and rights, it is important to contact a reputable and knowledgeable securities attorney if you are not sure if you have been a victim of fraud.
State Statutes of Limitations
Some states allow you to sue in state court for violations of state law. An aggrieved investor might prefer to file in state court. The statute of limitations for claims under state law could be as short as two years.
FINRA Arbitration
Investors who file a complaint about their broker or brokerage firm can access mediation and arbitration services from FINRA. Many brokerage firms include binding arbitration agreements with investors in their brokerage contracts. Arbitration agreements often stipulate that all disputes must be resolved by binding arbitration through FINRA. Arbitration clauses are included in investment brokers’ contracts to resolve disputes.
If they have signed an agreement with an arbitrator clause, victims will need to resolve disputes rather than suing in court. FINRA will only accept arbitration where an investment advisor is an active member.
Advantages of Arbitration
Investors will find arbitration with FINRA advantageous. Arbitration is more efficient than going to court for claims. Expert arbitrators are familiar with the essentials and know the legal obligations that a broker has to investors. If the arbitrator’s decision is not in accordance with the law, you may be able to challenge it in court.
There are several benefits to arbitrating:
- Arbitration is generally less costly than litigating a case in court.
- FINRA arbitrators have a greater knowledge of the subject than average juror in a courtroom.
- Arbitration hearings are not open to the public, unlike courts of justice, which are always open for public comment.
- If all disputes are resolved through arbitration, investment firms are less likely be in the news.
How FINRA Arbitration Works
The arbitration process at FINRA is similar to a typical court case. FINRA is not involved in the arbitration. Instead, FINRA acts as a mediator for the parties to resolve disputes.
An investor starts the process by filing a formal complaint to FINRA. FINRA serves the investor with a formal complaint. The complaint details the alleged wrongdoer. It also indicates that the defendant must answer the complaint. After conducting discovery, the parties prepare to present their case to an arbitrator panel.
Arbitration panel selection is determined by the value of the claim. FINRA uses a summarized arbitration process for claims below $50,000. After the parties have reviewed a list, one non-public arbiter or an arbiter member of FINRA receives the assignment. Participants may take part in the arbitration remotely.
Arbitration parties with claims exceeding $50,000 must attend the hearing personally. For claims exceeding $100,000, three arbiters are required. The non-public arbiters of two cases exceeding $100,000 will be the arbiters. The third arbiter can not be affiliated with FINRA and will be a public arbitrator. Parties will be provided with a list of potential candidates to preside at the arbitration. Parties could remove all non-public arbitrators from the list, and only public arbiters will hear their case.
The arbitrators listen to the evidence, receive exhibits, and hear arguments. Arbitrators determine the facts and apply relevant law. The panel makes a decision after deliberation. The panel’s judgment is final.
Defending an Arbitration Award in Court
Arbitration awards can be overturned by both federal and state courts with limited authority. The following conditions are required for a court to overturn an arbitration award:
- The fraud or corruption that led to the award is what caused it.
- The arbitration panel had a bias against one party;
- One party was not protected by the arbitration panel.
- The arbitrators exceeded their authority.
- The relevant law was not considered by the arbitrators, or the award resulted from an irrational decision.
Arbitration awards are rarely overturned by the courts. Investors who take their case to arbitration should have representation by an attorney with exceptional insight and skill in order to win the case.
Reasons to file a claim against an investment broker
Investor safety and market integrity are two of the reasons Americans have confidence in the US securities trading markets. Investors are well aware of market volatility and can accept the risks involved in securities investing. Despite market volatility, “putting money in the markets” is still the best way to grow wealth, save for college, and plan for retirement.
While some people can manage their own money, others turn to an investment broker who can help them grow their wealth. Investors fear losing their nest egg, so they turn to professional brokers to help them protect it. An average investor trusts their broker to help them make sound financial decisions that are consistent with their investment goals.
They should be held responsible if your investment broker violated your trust or their duty to act in your best interests. Get the representation you need to recover the money you have lost
You should be able to trust a broker to protect your investment and keep your hard-earned cash safe. Your brokers can be held responsible for damages if misconduct is proven.
FINRA FAQs
What is the deadline for filing an arbitration?
You must act quickly to take full advantage of your legal rights. Otherwise, you could lose your right to seek a remedy and recover funds.
Rule 13206 for Industry Disputes, and Rule 12206 Customer Disputes defines the time frames for submitting a claim to arbitration. These rules allow for a claim to be filed within six years of the event or occurrence, giving rise to the cause. Time restrictions, also known as “statutes of limitations,” can be less than six years. As a defense, a respondent in your case may raise a statute that is less than 6 years. We recommend you speak with an attorney to determine if a statute of limitations applies to your case and discuss your rights.
Is it possible to get an extension of time for service and to file a Statement in Answer?
You can request extensions of time to file a statement or answer questions. However, unless you have shown good cause, FINRA staff won’t grant you an extension of the time it takes to answer.
You may also serve or file claims with your Statement of Answer. These types of claims are:
- Counterclaims against claimants are allowed
- Crossclaims against co-respondents already named
- Third-party claims against parties not named in any prior pleading.
You can assert counterclaims, cross claims or third-party claims. The filing fee is determined by the maximum claim amount, excluding interest, and expenses.
My claim is for $75,000 and want one arbitrator to resolve my case. Can the respondents request a panel of three arbitrators by submitting a counterclaim for more than $100,000?
Yes. Because the counterclaim exceeds $100,000, FINRA will appoint a panel of three arbitrators. The $100,000 threshold will apply to both respondents’ and claimants’ claims. Three arbitrators will be appointed if the claimants or respondents have a claim exceeding $100,000.
A respondent can obtain a panel of three arbitrators by adding a counterclaim not exceeding $100,000 but increasing the dispute’s total to more than $100,000.
Who will serve a Statement of Claim?
FINRA will serve your Statement to Claim on each respondent you have listed and against whom you are asserting a claim. FINRA will also notify you and the respondents of the location of the initial hearing.
FINRA does not have the obligation to serve any pleadings or motions on any party after the initial Statement of Claim has been served. These documents must be served on the DR Portal by you and the other parties.
You have 45 days to respond to claims and comply with the Code of Arbitration Procedure Rules 12303(a), Customer Disputes.
Do I need to hire a lawyer to arbitrate?
FINRA does not require that parties be represented by lawyers. Parties can appear without an attorney unless the state law prohibits it, the person is currently barred from the securities sector in any capacity, or is currently disbarred from the practice or suspended from the practice law.
You should be aware that the representation of a non-attorney could be considered the unauthorized practice of law in certain jurisdictions. Please check with the appropriate State Bar or similar organization for further information.
What’s a Submission Agreement?
A Submission Agreement is a document which indicates that you have chosen to submit a claim at the Office of Dispute Resolution. It also states that you will abide by any decision of the arbitrator(s).
Is it possible for an attorney to sign the Submission Agreement in my name?
Yes. Attorneys and other people filing claims can sign on behalf of a party if they have written/verbal powers of attorney or an actual/implied authority to do so.
A dedicated FINRA law firm has a team of experienced FINRA attorneys who will defend you if you have been a victim of broker fraud. Their lawyers won’t give up without a fight. Because they are experts in the operation of brokerage firms, these attorneys have the skills and experience to get investors compensation. Most have spent years representing high-dollar investment firms and brokerage firms before helping clients recover their investment losses.
If you are a victim of broker misconduct, don’t hesitate to contact a FINRA lawyer.