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Can (and Should) I File a Claim if the SEC is Investigating My Stockbroker?

April 30, 2024 Blog

The U.S. Securities and Exchange Commission (SEC) regularly investigates stockbrokers and brokerage firms for fraud. Unfortunately, stockbroker fraud is far more common than it should be, and each year, countless investors suffer fraudulent losses.

If the SEC is investigating your stockbroker or brokerage firm, what does this mean for you? Should you wait to see if the SEC’s investigation leads to a successful enforcement action? Or, should you take legal action on your own?

What Defrauded Investors Need to Know About SEC Investigations

The short answer is that you should take legal action on your own.

There are a couple of reasons why. First, there is no guarantee that the SEC’s investigation will lead to the recovery of investors’ fraudulent losses. The SEC does what it can with the resources it has available, and while these resources are substantial, the volume of stockbroker fraud far exceeds the SEC’s investigative and enforcement capabilities. As a result, sometimes the SEC will prioritize certain cases over others, and in some cases, the SEC will agree to settle enforcement actions without restitution.

Second, even if the SEC recovers fraudulent investor losses, any amount you may be entitled to receive from the SEC will almost certainly represent just a small portion of the total value of your stockbroker fraud claim. Along with lost principal, defrauded investors who file claims on their own can seek to recover various other types of investment-related losses as well.

What Should You Do if the SEC is Investigating Your Stockbroker or Brokerage Firm?

With this in mind, if the SEC is investigating your stockbroker or brokerage firm, you should speak with an experienced lawyer promptly. If you have a fraud claim, you will want to file your claim as soon as possible. An experienced lawyer will be able to assess your legal rights and take appropriate legal action on your behalf.

In most cases, this will mean filing a claim in FINRA arbitration. The Financial Industry Regulatory Authority (FINRA) works alongside the SEC to regulate the U.S. securities industry, and stockbrokers and brokerage firms consent to arbitration as a condition of registration. FINRA arbitration provides a streamlined way for investors to pursue claims for stockbroker fraud, and investors can hire a lawyer to represent them in FINRA arbitration at no out-of-pocket cost.

The damages available to defrauded investors in FINRA arbitration include:

  • Net out-of-pocket losses, trading losses or well-managed portfolio losses
  • Disgorgement of the stockbroker’s or brokerage firm’s ill-gotten gains
  • Interest
  • Punitive damages (in appropriate cases)
  • Costs and attorneys’ fees

Contact Us to Learn More About Filing a Claim for Stockbroker Fraud

If you need to know more about filing a claim for stockbroker fraud, we encourage you to contact us promptly. We represent defrauded investors in FINRA arbitration nationwide. To speak with a lawyer about your claim in confidence as soon as possible, please call 212-742-1414 or request a free consultation online today.

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