Financial fraud is a very real issue for individual investors. From incompetence to intentional efforts to profit at investors’ expense, there are numerous types of financial fraud that can lead to substantial investment losses. In many cases, these losses would be permanent if it were not for the process known as FINRA arbitration. The Financial Industry Regulatory Authority (FINRA) is the investment industry’s primary watchdog and regulator for investment brokers, and registered brokers are subject to mandatory arbitration of investor claims. If you believe that losses in your investment portfolio are the result of financial fraud, you should speak with a FINRA lawyer about filing a FINRA arbitration as soon as possible.
FINRA arbitration is a potentially faster way for those that have suffered losses in the markets as a result of negligence, securities fraud, or other external factors to make a claim for damages. The organization oversees brokerage firms and other market participants and works to ensure that they meet a published code of conduct when dispensing services to individuals and organizations across the US.
While arbitration can be less complex than litigation, it is vital to enlist the assistance of a skilled FINRA lawyer to ensure that your rights are respected throughout the process and that you are clear on what you want to achieve and how you will go about doing so.
Speak To An Experienced FINRA Lawyer from Zamansky Today
The attorney-client relationship between you and Zamansky LLC begins with a free, confidential consultation. Many FINRA lawyers look to repeat the same processes that they have used in the past, but our team takes the time to understand your unique circumstances and the finer details of your case.
Our firm is led by Jacob H. Zamansky, a FINRA lawyer who is one of the country’s leading authorities in the area of securities arbitration. With more than three decades of legal experience, he is trusted by investors and other FINRA lawyers across the nation. He has been at the forefront of the efforts to “clean up” Wall Street, and he has successfully represented clients against the largest brokerage and financial firms in the world.
We will help you understand whether you have a viable claim long before the arbitration process begins, and the nature of the way we work means you can expect an honest assessment of all manner of securities matters shortly after contacting us for the first time.
With offices in New York and Miami and a track record of representing defrauded investors from all over the country and internationally, we handle small and large claims alike.
If you require guidance and legal expertise from attorneys at a law firm with vast experience representing clients in FINRA arbitration proceedings, call us today at 212-742-1414.
No one is immune to the risks of investment fraud. Scam artists and unscrupulous brokers do not discriminate when it comes to targeting unsuspecting investors.- Jacob H. Zamansky
What Is the Financial Industry Regulatory Authority (FINRA)?
FINRA is a non-governmental organization, but one that is authorized by congress to provide regulatory services in the securities industry. It is the dominant self-regulatory organization (SRO) in the United States for brokerage firms, with over 4,700 of them ranking among FINRA’s members.
It is not the only SRO involved in the financial services industry, but it is by far the biggest in the country. Others, such as the National Futures Association, deal specifically with smaller elements of the markets–derivatives, in the case of the NFA.
FINRA and its Oversight of Brokerage Firms
FINRA has the legal authority to create policies and procedures that govern the activities of any brokerage firm in the country and maintain industry standards of conduct to which all members are expected to adhere.
The organization is also likely to get involved in investor claims against its members. Typically, any investor that feels they have a case against broker-dealers, financial advisors, or other financial professionals will have the option to consult their attorney on whether to pursue restitution through litigation of the arbitration process. If they opt for the latter, it is likely that FINRA will get involved in the dispute.
How A FINRA Lawyer Can Help With The Unique FINRA Arbitration Process
FINRA has its own Code of Arbitration process, spanning not only investment disputes but also employment disputes within the financial industry.
The need for specialist FINRA lawyers typically stems from the fact that many investors working with individual brokers that are FINRA members will need to submit a written agreement when opening a brokerage account to agree that any dispute that arises between the two parties will be handled in the FINRA arbitration forum.
An arbitration claim against a brokerage firm or financial advisor is designed to be faster and more cost-effective than litigation. Nevertheless, FINRA arbitration attorneys are all but essential in pursuing a case, and our lawyers can handle many of the most complex elements of any arbitration proceeding.
Your FINRA attorneys will:
- File the statement of claim with FINRA – The statement of claim is required to initiate the arbitration process and details the nature of customer claims. The document outlines the reason for the claim and how it resulted in the claimant entering securities arbitration, including how the actions of the FINRA member led to the claimant suffering financial loss. The other party has 45 days from the filing date to respond.
- Help in the arbitrator selection process – Prior to the commencement of the FINRA arbitration process, both sides must agree on an arbitration panel. This may involve a single arbitrator, often a neutral third party, or three arbitrators to oversee proceedings and make arbitration decisions. If either participant in the securities arbitration process objects to the appointment of any arbitrator, that individual will be removed from proceedings. However, if both parties agree on the selection, they will be added to the panel. Typically, claims worth between $50,000 and $100,000 will be overseen by one arbitrator, while those worth $100,000 or more will involve a panel of three arbitrators to oversee the FINRA arbitration hearing.
- Help conduct discovery – Unlike in typical litigation cases, most FINRA arbitration claims do not give either party the right to conduct depositions. However, your FINRA lawyer can conduct a discovery process and is entitled to request account statements, correspondence, and other documentation from the brokerage firm, investment firm, or financial advisor. The investor that brings the claim should also be happy to present evidence to support their case, such as any correspondence received that is directly related to the dispute.
- Represent you throughout arbitration proceedings – Our attorneys will represent you in FINRA matters during the arbitration hearing just as they would in court. This typically begins with an opening statement, followed by the presentation of evidence and the cross-examination of any witnesses. They will then make any closing statements at the end of the hearing.
It is important for investors that file a statement of claim to understand that their claims may not be arbitrated on the same day as FINRA arbitrations take place. The organization has up to thirty days following the hearing to make a decision and often allows only limited grounds for appeal once a decision is reached.
Common FINRA Arbitration Cases
Generally speaking, arbitration claims can arise when an individual or organization suffers investment losses due to greed or negligence on the part of those appointed to advise them, such as an investment advisor or brokerage firm. If you are unsure whether your case qualifies, we invite you to speak to a specialist FINRA attorney from our law firm to put your potential claim into context.
If any of the following common cases seem familiar or apply directly to your circumstances, you are in a strong position to consider filing arbitration claims to resolve your dispute.
A Breach of Fiduciary Duty
Fiduciary duty breaches occur when someone in a position of trust fails to meet their legal obligations. For example, the attorney-client relationship assumes a fiduciary duty to clients on the part of their attorneys.
Specifically, the onus is placed on a financial professional to give advice and make decisions putting the best interests of their clients first. That means that they will not carry out trades for personal gain, nor will they recommend a particular investment in pursuit of higher commissions when it does not fit the client’s risk tolerance profile.
Failure to Disclose Risk
In addition to their fiduciary duty to clients, a brokerage firm or other financial professional has an obligation to understand their client’s profile, including their attitude to risk. Younger clients may be more open to risk when making investment decisions, while those closer to retirement may prefer steady growth without any chance of losing everything.
Common misrepresentations include mischaracterizing the risk associated with a particular investment, misrepresenting a company’s financial condition, and withholding information about the fees and commissions investors will be required to pay. Both intentional and unintentional misrepresentations can support claims in FINRA arbitration, and there are a number of ways we can prove that your broker or investment advisor deprived you of the opportunity to make an informed decision.
If an advisor fails to take a client’s risk tolerance into account when providing investment advice, that may give rise to a dispute worthy of arbitration.
Many cases of securities fraud can be traced back to negligence on the part of someone involved, not least because there are multiple points of failure in any fiduciary relationship. Claims made on this basis might potentially involve the recommendation of financial instruments with which the brokers themselves are unfamiliar, or they might have failed to meet the industry standards that FINRA itself is tasked with upholding.
Negligence claims can also arise following the initial recommendation or investment. For example, if a financial advisor assures a client that they will take an active role in their investments, such as monitoring diversification or altering the investment strategy in the face of unforeseen market conditions, they can be considered negligent if they fail to do so and this leads to investment losses.
Some investors prefer to retain full control over their strategy, making decisions based on advice from financial professionals but handling the purchase and disposal of assets for themselves. Others leave the buying and selling to the professionals, but often with limited scope.
If an appointed individual elects to make trades for which they do not have permission, it is considered unauthorized trading. Many FINRA claims arise not only when finance professionals make trades for those that prefer to do it themselves but also when the advisor goes above and beyond the scope afforded to them by a client.
For example, it is worth speaking to a FINRA attorney about potential claims if you believe that your financial advisers made decisions that conflict with your overall strategy.
Investment professionals have a legal obligation to provide their clients with “suitable” investment advice. A suitable investment recommendation is one that (i) has a reasonable basis, (ii) fits the individual investor’s financial condition and risk profile, and (iii) makes sense within the broader scope of the investor’s overall portfolio. Unsuitable investment recommendations can cause unexpected losses when investors can least afford them, and they will often provide grounds to seek financial recovery through FINRA arbitration.
Excessive Trading / Churning
Excessive trading is another common form of investment fraud that will often be accompanied by unsuitable investment advice, breach of fiduciary responsibility, and fraudulent misrepresentations or omissions. Also known as “account churning,” excessive trading involves buying and selling securities in an investor’s account for the purpose of generating fees and commissions. If you are seeing trades that you did not authorize, if your broker or advisor is frequently “in and out” of individual investments or if you are being charged excessive (and perhaps ambiguous) fees, these are all potential signs that you are a victim of investment fraud – and a FINRA lawyer can help.
Yield Enhancement Strategies
A YES strategy is an investment where a broker sells call or put options to enhance returns in relatively stable or flat markets. Although the YES strategy is often pitched as a “safe” or “stable” for consistent returns, the reality is that the investment products bought and sold under YES strategies are extremely complex and risky, and unexpected market turbulence can quickly lead to substantial losses. The iron condor is a specific version of a YES strategy that often leaves investors with a surprise, significant loss.
Other Forms of Fraud
Various other forms of investment and financial fraud can support claims in FINRA arbitration as well. At Zamansky, LLC we represent clients whose portfolios were overconcentrated, who were bilked into oil and gas investment scams, who invested in junk bonds and overly-complicated structured products, and who have suffered all other types of fraudulent investment losses. If you believe that you may have a claim, or if you are unsure and would like to find out, it is strongly in your best interests to seek legal representation as soon as possible. FINRA lawyers can assess your situation and help you make an informed decision about asserting your legal rights.
Current Fraud Investigation: Zamansky is currently investigating claims of securities fraud, investment fraud, misrepresentation, breach of fiduciary duty and other sales violations towards GWG Holdings L Bond holders sold by Emerson Equity.
How Does A FINRA Lawyer Help?
The processes and procedures used by FINRA in any arbitration claim are relatively unique, making it all the more important to consult an attorney with experience representing investors under these specific circumstances.
Some elements of claims may be similar to court proceedings. However, FINRA itself is generally responsible for the entire process, even if the arbitrators themselves are entirely neutral.
In claims where the expected value is $50,000 or less, FINRA will typically make a decision based solely on the information received from your attorney, with no physical hearing taking place.
Your FINRA lawyer can also help navigate claims that involve two or more parties on one side. While this is relatively rare, it is permitted under FINRA rules when multiple claimants wish to enter arbitration for joint relief or each has claims based on the same transaction.
Your FINRA attorneys will often dictate the process while always ensuring that they take on board any questions or concerns you may have. While every case is different, the fact remains that FINRA’s rules and regulations are fairly stringent. As such, what may potentially make for robust evidence in one case will likely do the same in another.
When you appoint a FINRA arbitration attorney from Zamansky LLC, you will also benefit from vast, real-world experience in overseeing proceedings. From filing the initial statement of claim to making the closing statement, you are in safe hands with a legal professional that knows exactly what it takes to succeed.
Zamansky LLC – Your FINRA Arbitration Attorneys
While there are several similarities between litigation and arbitration, it is vital that investors understand the differences and work with someone that can provide the advice and guidance they require to put together a winning claim.
At Zamansky LLC, we have offices in the heart of Wall Street, meaning we always have our collective finger on the pulse of the industry with lawyers that also work out of our offices in Miami.
As specialist financial lawyers, we represent clients spanning individuals, organizations, and institutions that wish to raise disputes against financial advisors and brokerage firms. Crucially, we work with clients from across the United States, and we also serve as a primary point of contact for international investors that require the local expertise and experience that our team delivers.
Dealing with FINRA can be a daunting proposition given the nature of their operations in the industry, but it is important to remember that while they represent their members, they are also responsible for upholding their high standards. If those standards have not been met, they do not hesitate to hold their members to account.
Backed by our FINRA arbitration attorneys, who know precisely how to put together a winning case, you can rest assured that you always have someone working in your best interests, as evidenced by the fact that our lawyers typically work based on a success fee. That ensures that we are every bit as invested in your success as you are.
Expertise and experience go a long way when approaching FINRA arbitration, and we will apply all of that and more to your case. As part of the initial free consultation, we will get to know you, your case, and what you hope to achieve. From there, we will act as your partner in pursuit of the damages you deserve.
Call our offices today at 212-742-1414 to discover exactly how we can be your most potent supporters in rectifying securities fraud, breach of fiduciary duty, and anything else that may have contributed to your investments not turning out as planned.
Frequently Asked Questions Answered By A FINRA Lawyer
How do I know if I should file for FINRA arbitration with a FINRA Lawyer?
As an individual investor, it can be difficult to know whether you have legal grounds to pursue a financial recovery. The best way to determine whether you should file for FINRA arbitration is to discuss your case with an experienced financial fraud attorney. At Zamansky, LLC, our FINRA lawyers offer free initial consultations, and our attorneys can help you decide whether to pursue a claim.
What are my chances of recovering fraudulent investment losses through FINRA arbitration?
Your chances of receiving an award in arbitration are entirely depending upon the facts of your particular case. As a result, a FINRA arbitration attorney cannot estimate your chances of recovery without speaking with you. However, we can share some statistics that have been published by FINRA:
- From 2012 through 2016, 76 percent of all cases filed resulted in settlements or arbitration awards
- Approximately 80 percent of all FINRA arbitration rewards result in payment to the investor, and FINRA and Congress are both actively considering measures to bolster investors’ ability to recover
- From 2013 through 2017, FINRA arbitrators awarded investors more than $233 million in restitution for fraudulent investment losses
Is FINRA arbitration the same as going to court?
It is often possible to recover financial compensation without going to court. If you have lost money because of a bad broker or financial advisor, you may be eligible to file a FINRA arbitration claim. The FINRA arbitration process is typically quicker and less costly than litigation. In the event that you decide to litigate your case, your FINRA lawyers may be able to settle your lawsuit without going to court.
Are all misrepresentations and omissions grounds for investors to seek financial restitution?
To constitute a violation of Rule 10b-5, a misrepresentation or omission needs to be “material.” This means that it must be something that would impact a reasonable person’s investment decisions. If you relied on inaccurate or incomplete information from your broker or investment advisor when making an investment decision, you might have a claim for actionable financial fraud.
Can an investment broker disclaim his or her obligation to provide suitable investment advice?
Investment brokers’ obligation to provide suitable investment advice exists under FINRA Rule 2111. While brokers will often try to limit their potential liability in their customer contracts as much as possible, the Supplemental Material under Rule 2111 is clear: “A member or associated person [i.e., a broker or brokerage firm] cannot disclaim any responsibilities under the suitability rule.”
What should I do if I suspect investment fraud?
If you suspect that you may be a victim of investment fraud, you should speak with a financial fraud attorney promptly. In many cases, acting quickly will give you the best chance to secure a financial recovery. You should collect your account statements and any documents or communications you have received from your broker or advisor, as well as call to schedule a confidential initial consultation with an investment fraud attorney.
Who are FINRA Arbitrators?
FINRA arbitrators are classified as either “public” or “non-public.” A public arbitrator is someone who does not have a significant affiliation with the securities industry. This means that he or she has not worked in the securities industry as a broker or advisor, has not worked for a securities regulator, and has not served as a lawyer representing clients in securities-related arbitration or litigation. A non-public arbitrator is someone who meets FINRA’s general arbitrator qualification criteria but does not qualify as a public arbitrator. The general arbitrator qualification criteria include having a minimum of five years of professional experience and two years of college credits.
If a dispute is assigned to a single arbitrator, that arbitrator will be a “chair-qualified” public arbitrator. If a dispute is assigned to a three-person arbitration panel, the panel will consist of either:
- One chair-qualified public arbitrator, another public arbitrator and a non-public arbitrator; or,
- One chair-qualified public arbitrator and two other public arbitrators.
FINRA currently has a roster of more than 7,000 qualified arbitrators. After an investor files a claim, FINRA generates a list of potential arbitrators using its Neutral List Selection System (NLSS) to both parties. FINRA then provides this list to both parties along with an Arbitrator Disclosure Report for each listed arbitrator. This Arbitrator Disclosure Report includes information about the arbitrator’s education and employment history as well as the arbitrator’s past decisions.
After reviewing the Arbitrator Disclosure Reports and conducting additional research, each party goes through a process of striking and ranking potential arbitrators. FINRA then assigns the arbitrator or arbitrators with the highest combined ranking(s).
Where Does FINRA Arbitration Take Place?
In some cases, FINRA arbitration hearings will take place via telephone or videoconference. By default, when hearings are held in-person, they are held at one of FINRA’s 69 hearing locations across the United States. FINRA has at least one hearing location in all 50 states and a location in San Juan, Puerto Rico. However, your FINRA attorney can request an alternate hearing location in their state, and the parties can also agree to arbitrate at an alternate mutually-acceptable location.
How Long Do Investors Have to File for FINRA Arbitration?
Under FINRA’s rules, investors have six years to file for arbitration after suffering fraudulent investment losses. Even so, it is important for investors to engage a FINRA attorney and file their claims promptly, as this can often significantly increase their chances of financial recovery.
Did You Invest Based on False Financial Guidance? A FINRA Attorney Can Help
When investment advisors provide investors with false financial guidance, investors can face substantial losses. Since investors rely on their advisors to help them grow their portfolios, this is a major problem. Investors need to be able to trust the financial guidance they receive; and, when they discover that they cannot trust this guidance, they can often seek to recover their losses in securities arbitration or in court.
In most cases, however, stock brokers and investment advisors are not the original source of this false information. Companies that offer stock to the public are required to publish financial guidance under federal law. More specifically, they are required to publish accurate financial guidance that paints a realistic picture of their revenue, costs, profits, earnings forecasts and other financial metrics.
So, if you invested in a company through an investment advisor or stock broker only to subsequently learn that you received false financial guidance, what should you do?
Pursuing a Claim Against Your Investment Advisor for Providing False Financial Guidance
While investment advisors have numerous responsibilities, these responsibilities can broadly be summarized in two categories: (i) they must conduct adequate research to provide informed investment recommendations, and (ii) they must provide suitable investment recommendations with their clients’ best interests in mind. Unfortunately, failures are common in both categories.
Let’s consider a common scenario: A company releases new financial guidance suggesting that its stock price is poised for sustainable long-term growth. An investment advisor learns about the guidance in a headline or news wire, downloads the guidance, and sends it to his or her clients with a general recommendation. Several clients respond quickly saying that they want to invest.
Instead of rising, the stock price drops. The next headline states that the company is under investigation by the U.S. Securities and Exchange Commission (SEC) for issuing false financial guidance. The price drops further, and the investment advisor’s clients are left wondering what went wrong.
So, what did go wrong? The answer is simple: The investment advisor did not do his or her job. The investment advisor did not analyze the company’s financial guidance, and the advisor did not provide suitable client-specific investment recommendations. Had the advisor analyzed the guidance, there is a good chance that he or she would have spotted red flags—and that the advisors’ clients could have avoided the losses they incurred.
Of course, investors have a certain amount of responsibility for their own investments. They must choose their investment advisors carefully, they must monitor their portfolios, and they must read the information their investment advisors provide. But, if this information is inaccurate, even investors who do their best to protect their portfolios can still end up facing fraudulent stock losses.
In this type of scenario, investors will often be able to pursue fraud claims against their investment advisors in FINRA arbitration. Investors pay fees (and often substantial fees) for the investment recommendations and portfolio management services they receive from their investment advisors. They rely on their investment advisors’ expertise and duty to act in their best interests. When investment advisors rely on false financial guidance—and when they should have known not to rely on this false guidance—investors can pursue claims for negligence, unsuitability, fraud and various other violations of federal securities laws and FINRA regulations.
Can You Sue the Company, Too?
Now, what about the company itself? Unfortunately, despite the laws against it, companies routinely publish false financial guidance. Sometimes it is inadvertent, sometimes it is intentional and sometimes it is the result of willful ignorance. But, regardless of why a company publishes false financial guidance, the fact of the matter is that the company has released material misinformation that has misled investors. This in itself is a violation of the law that entitles investors to legal remedies.
By its nature, financial guidance involves anticipating future events. No company can do this with absolute certainty. As a result, proving that a company’s forecasts are “false” can be difficult. In some cases, financial guidance that was valid at the time of its release will prove to have been misguided. This happens, and it is not necessarily indicative of fraud.
Federal securities laws provide public companies with a “forward-looking statements safe harbor.” This safe harbor establishes enhanced pleading requirements for investors who are seeking to prove that a company’s financial guidance was false. Two relatively common ways that investors can overcome this safe harbor and seek damages for a company’s release of false financial guidance are:
- Knowingly Publishing False Financial Guidance – If an investor alleges that a company knowingly published false financial guidance, this can overcome the forward-looking statements safe harbor. This could involve alleging that the company intentionally falsified financial data, relied on improper accounting methods, shifted revenue or costs between accounting periods, or engaged in a variety of other types of fraudulent practices in order to provide apparent support for inflated financial projections.
- Knowingly Relying on False Material Assumptions – Investors can also overcome the safe harbor by alleging that a company’s financial guidance relies on false material assumptions. For example, a company may make projections based on past revenue from a contract with a long-term customer. But, if the customer has already informed the company that it does not intend to renew the contract for the upcoming year, then basing the company’s guidance on its prior revenue would also generally be considered fraudulent.
These are just two of several possible examples. There are many other ways that companies can mislead investors with false financial guidance—and investors can pursue litigation against companies in a broad range of circumstances.
Our FINRA Arbitration Attorneys Explain How to Prepare for Your Claim
If you believe that you may be a victim of broker or brokerage firm fraud, what should you do? Here are some key steps you should take right away to improve your odds of recovering your fraudulent investment losses:
- Collect Your Account Statements – Download your account statements dating at least as far back as the date you suspect that the fraudulent activity began.
- Learn More about Broker and Brokerage Firm Fraud – While our FINRA attorneys can explain everything, it can be helpful to learn more about the basics of broker and brokerage firm fraud before your initial consultation. Our overview of common causes of action in FINRA arbitration is a good place to start.
- Learn More about FINRA Arbitration – It can also be helpful to familiarize yourself with the FINRA arbitration process. We have prepared an overview of this as well: What to Expect When You File for Securities Arbitration.
- Contact a FINRA Attorney – The most important thing you can do if you have concerns about broker or brokerage firm fraud is to contact a FINRA arbitration attorney. An experienced attorney will be able to assess your situation, deal with your broker or brokerage firm on your behalf, and pursue a claim in FINRA arbitration if necessary.
Our FINRA Lawyers Can File Your Claim
There are three requirements to initiate a claim in FINRA arbitration. Investors seeking to recover their fraudulent losses must submit: (i) a Statement of Claim, (ii) a Submission Agreement, and (iii) the applicable filing fees. A Statement of Claim sets forth the investor’s allegations and specifies the damages the investor seeks to recover. It may include account statements, prospectuses or other documentation as support, but it must comply with FINRA’s filing restrictions. A Submission Agreement confirms the investor’s commitment to comply with FINRA’s arbitration rules and the investor’s understanding that the arbitration decision will be binding (subject to the right to file a motion to vacate or modify, as discussed below).
The FINRA Arbitration Process
- FINRA arbitration is similar to the traditional litigation that you are probably most familiar with. An investor, called the “Claimant,” who has been harmed by his or her brokerage firm’s misconduct, works with an experienced FINRA attorney at our financial fraud law firm to, prepare and file a “Statement of Claim.” This Statement of Claim describes the parties’ backgrounds, provides detailed facts on the dispute and explains the legal basis for why the investor should recover the losses suffered as a result of the brokerage firm’s misconduct.
- Next, the brokerage firm, which is referred to as the “Respondent,” files its “Answer.” The Answer typically responds to the factual allegations contained in the Statement of Claim and lays out the legal arguments for why the firm should not be held liable for the Claimant’s losses.
- The next stage of the FINRA arbitration process is the selection of arbitrators to hear the claim. FINRA provides a slate of potential arbitrators who have received the required training. Each party ranks the arbitrators and strikes a certain number of arbitrators it will not consent to have on the arbitration panel. FINRA reviews the parties’ rankings and appoints the arbitration panel. The panel conducts an initial hearing to select hearing dates and set out other deadlines to which the parties must adhere. A link to FINRA’s explanation of the arbitrator selection process can be found here.
- The next stage in the arbitration process is the exchange of documents and information called the “discovery process.” The discovery process is governed by a set of guidelines adopted by FINRA. A link to FINRA’s guidelines can be found here. There are certain documents that are mandated to be exchanged in disputes between investors and their brokerage firms. While there can be some flexibility in terms of the scope of what is produced, the FINRA guidance provides a good sense of what an investor can expect from this process. If you retain a financial fraud attorney from our firm to bring a FINRA arbitration, we will work with you to help make the discovery process as simple as possible. Potential clients should also be aware that all documents in the discovery process are exchanged under the protection of a strict confidentiality agreement. This means that not only are the documents handled with care and sensitivity by our firm, but they can never become public through the discovery process. FINRA’s overview of the discovery process can be reviewed here.
- After discovery is complete, the case is ready for a hearing before the panel of arbitrators. The panel is typically made up of three people who are outside of the securities industry—these individuals could be lawyers, business professionals, professors, etc.
- After both sides present the evidence to support their cases, the securities arbitration panel issues an “award” that determines whether the investor will receive all, some or none of his or her losses. Arbitration awards can be successfully appealed only under very limited circumstances, so investors should think of the arbitration award as binding and final. FINRA’s discussion of the hearing process can be found here.
The arbitration process normally takes between a year and fifteen months from start to finish, but your FINRA lawyer will be with you every step of the way.
Our FINRA Lawyers Can Also Challenge Your Arbitration Award
FINRA does not have an appeals process for investor arbitration. Instead, if an investor, broker or brokerage firm wishes to challenge an arbitration award, it must file a motion to vacate or modify the award in federal court. Under the Federal Arbitration Act, a motion to vacate or modify must be filed within three months of the date of the arbitrator’s decision. Some states have arbitration statutes that provide an even shorter amount of time to challenge an arbitrator’s or arbitration panel’s decision.
There are limited grounds for challenging the outcome of FINRA arbitration. The Federal Arbitration Act provides that a federal judge may overturn or modify an arbitration award if:
- The award was procured by fraud, corruption or other undue means
- The arbitrator or arbitrators showed evident partiality
- The arbitrator or arbitrators engaged in misconduct by refusing to postpone a hearing or hear material evidence despite sufficient cause being shown
- The arbitrator or arbitrators engaged in other misconduct that prejudiced the rights of the party seeking to challenge the award
- The arbitrator or arbitrators exceed their authority or imperfectly executed their authority to the extent that a final and definite award was not rendered
- The arbitrator or arbitrators exhibited manifest disregard of the law
- There was no reasonable basis for the award
6 Key Facts about FINRA Arbitration for Individual Investors
FINRA arbitration is a legal process that results in a legally-binding decision without the need to go to court. FINRA arbitrators are experts in investment fraud, and each year they handle hundreds of cases that result in hundreds of millions of dollars in fines and restitution.
1. You Have Six Years to File Your Arbitration Claim
The “statute of limitations” for seeking to recover fraudulent investment losses through FINRA arbitration is six years. While you don’t want to wait anywhere near this long if you don’t have to, if it has been years since your broker took advantage of you, you could still be entitled to recover your fraudulent losses.
2. If You Win, You Are Entitled to Payment Within 30 Days
If the FINRA arbitrators rule in your favor, you will be entitled to payment within 30 days of the date of the arbitration award. In addition, most FINRA arbitration claims settle, which means that the broker or brokerage firm agrees to compensate the investor for his or her losses.
3. Hiring a Financial Fraud Attorney Isn’t Required, But It Is Strongly Recommended
Although you are not required to hire a FINRA attorney to represent you in arbitration, seeking legal representation is strongly recommended. Not only is the arbitration process intricate and complicated, but you need to be able to prove that you are legally entitled to recover your investment losses.
4. It Can Cost You Nothing Out of Pocket to Hire an Experienced Attorney
At Zamansky, LLC, we typically handle individual investors’ arbitration claims on a contingency-fee basis. This means that our financial interests are fully aligned with yours, and you do not pay anything unless we help you secure financial compensation.
5. FINRA Arbitration is Faster and Less Expensive than Going to Court.
While going to court can take years and will often be prohibitively expensive for individual investors, arbitration provides a faster and less-expensive alternative. Even when a claim goes through the entire arbitration process and to a final hearing, the average time to resolution is about 18 months.
6. About Half of All Arbitration Claims Result in Direct Settlements.
Only a relative small percentage of FINRA arbitration cases – about one in five – go to a final hearing. About half of all investment fraud arbitration claims result in a direct settlement between the parties.
Why Choose Zamansky, LLC for Your FINRA Lawyer?
If you think you may be entitled to recover your investment losses through FINRA arbitration, you need to make an informed decision about your legal representation. So, why should you choose Zamansky, LLC?
- Experience – Our securities fraud lawyers have decades of experience representing individual investors and have recovered millions of dollars in compensation for their fraudulent investment losses.
- Focus – Our securities and financial fraud law firm is committed to representing investors who are victims of fraud. Helping investors is all we do, and this focus has allowed us to become leaders in our industry.
- Results – We have a proven record of success in FINRA arbitration. Our FINRA lawyers have won numerous high-profile cases, including a record $3.1 million award against UBS Puerto Rico relating to the Puerto Rican municipal bond crisis.
- Team Approach – Our team of attorneys, led by firm founder Jacob H. Zamansky, takes a collaborative approach to fighting for our clients. We know what is at stake, and we do what it takes to win.
- National Practice – With offices in the heart of Wall Street, we represent individual investors nationwide. Regardless of where you live, what you invested in, or how much you lost, we want to see you achieve justice, and we are prepared to fight for the compensation you deserve.
If you are ready to speak with a FINRA lawyer, we encourage you to get in touch. You do not need to know if you have a claim in order to schedule a free consultation. We will explain everything you need to know; and if you choose to move forward, we will do everything in our power to help you recover your fraudulent investment losses.
To schedule a free consultation with a FINRA lawyer experienced in FINRA matters at Zamansky, LLC, please call 212-742-1414 or contact us online. You can reach us 24/7, and if we are not available immediately, we will respond as soon as possible.