Concerned About Losses from Financial or Securities Fraud? Speak With a FINRA Attorney for Free
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 attorney about filing a FINRA arbitration as soon as possible.
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 attorneys 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.
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
Claims Handled by Our FINRA Attorneys
We represent clients ranging from retirement savers to multi-millionaire private investors. From our experience, we know that no one is immune to the risks of investment fraud, and we know that scam artists and unscrupulous brokers do not discriminate when it comes to targeting unsuspecting investors. We routinely help investors recover fraudulent losses resulting from:
- Unsuitable Recommendations – 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.
- Breach of Fiduciary Duty – Investment professionals who owe a fiduciary duty to their clients must make all investment recommendations with their client’s best interests in mind. Recommending investments solely because they will generate fees or commissions is just one example of a breach of fiduciary duty that can trigger liability in FINRA arbitration. While certain investment professionals are not subject to a fiduciary duty, many are; and, if you have a claim for breach, we can help you secure a financial recovery.
- Misrepresentation – 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.
- Excessive Trading – 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. A financial fraud attorney 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.
FINRA arbitration provides a forum for defrauded investors to recover their losses. In order to be eligible, an investor must have a claim against a broker or brokerage firm that is registered with FINRA. This can be confirmed using FINRA’s BrokerCheck®.
Our firm is led by Jacob H. Zamansky, a financial fraud 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 attorneys 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.
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.
Frequently-Asked Questions Regarding FINRA
How do I know if I should file for FINRA arbitration with a financial fraud attorney?
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 arbitration attorneys 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.
Why Choose Zamansky, LLC for Your FINRA Attorney?
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 attorneys 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 attorney, 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.