Unexpected Investment Losses? 6 Key Facts About Securities Arbitration


For individual investors, securities arbitration through the Financial Industry Regulatory Authority (FINRA) provides a streamlined opportunity to recover fraudulent investment losses. If you have experienced sudden and unexpected losses in your investment account, here are six key facts you need to know about FINRA arbitration:

1. To File, Your Broker or Advisor Must be Registered with FINRA.

In order to be eligible for FINRA arbitration, you must have suffered investment losses in an account managed by a broker or brokerage firm that is registered with FINRA. All legitimate brokers and brokerage firms should be registered, and you can use FINRA’s BrokerCheck® tool to find out if your investment manager is a FINRA member.

2. You Have Six Years to File for FINRA Arbitration.

Under FINRA’s arbitration rules, investors have six years to file for arbitration. This “statute of limitations” runs from the date of the fraudulent loss. While six years is a long time, (i) your losses may be spread out over an extended period of time, and (ii) filing promptly can increase your chances of securing a financial recovery.

3. Through FINRA Arbitration, Investors Can Recover Fraudulent Investment Losses.

Investing inherently involves a risk of loss. Not all losses are fraudulent, and not all losses are eligible for FINRA arbitration. If your losses are the result of market conditions, your broker may not have done anything wrong.

However, broker fraud takes many forms, and if your losses do not appear to be tied to market factors, you should discuss your rights with an attorney. Some of the most common forms of broker fraud include:

  • Breach of fiduciary duty
  • Excessive trading
  • Misrepresentations and omissions
  • Over-concentration in stocks or other investments
  • Unauthorized trading
  • Unsuitable investments

For more information about each of these forms of broker fraud, you can read: Common Causes of Action in FINRA Arbitration.

4. 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.

5. 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.

6. While Hiring a Lawyer is Not Mandatory, it is Strongly Recommended.

When pursuing securities arbitration, you have the option to proceed without a lawyer. There is nothing in FINRA’s arbitration rules that specifically requires investors to seek legal representation. However, brokers and brokerage firms generally hire counsel, and an experienced investment fraud attorney will be able to help you calculate your total losses, pursue all possible causes of action and maximize your financial recovery.

Contact Zamansky LLC for a Free and Confidential Consultation

The investment fraud lawyers at Zamansky LLC represent individuals in FINRA arbitration nationwide. We provide free case evaluations, and we do not charge any legal fees unless we help you secure a financial recovery. To find out if you are eligible to file for arbitration, call us at (212) 742-1414 or request your free case evaluation online today.