Can I Sue My Broker?

We have seen a number of cases where financial advisors and stockbrokers fail to keep their clients’ interests in mind. Some advisors and brokers simply do what is best for themselves rather than what is best for their clients.

The industry has no shortage of individuals who fail to take their clients’ needs into account. This is detrimental to the client. As a result, investors are often stuck with investment products that are entirely inappropriate for their financial goals, risk tolerance, and overall lifestyle.

Despite this reality, some advisors and brokers simply fail to take these factors into account because they are blinded by high commissions for selling the products. Consequently, investors that placing trust in these types of individuals are deeply impacted by their actions. Entire portfolios may be destroyed based on the broker’s actions.

The question begs, “Can I Sue My Broker?”

In short: yes. However, the term “sue” is used loosely: although it is unlikely that you may formally “sue” your broker in court, you can bring claims against your broker to FINRA, the Financial Industry Regulatory Authority. Most brokerage firms are required to register with FINRA in order to sell securities and investment products to clients.

FINRA is generally the most common method for resolving disputes between clients and brokers. There are two main FINRA dispute resolution methods: arbitration and mediation.

Differences Between Arbitration and Mediation

There are several important similarities and differences between arbitration and mediation.

Both processes are quite different from standard court proceedings. Arbitration and mediation are efficient, cost-effective alternatives compared to court proceedings. Court proceedings can take years to resolve, while FINRA claims in the past three years have led to a decision in an average of 14-15 months.

In an arbitration proceeding, disputes between parties are resolved by the arbitrator, a neutral third-party. The arbitrator hears arguments from both sides and makes a decision thereafter. In larger cases where claims exceed $100,000, the case is heard before a panel of three arbitrators. Otherwise, each case generally involves a single arbitrator.

Mediation, on the other hand, is less formal than arbitration. Mediations involve one mediator who meets with both parties to resolve the underlying conflict and potentially reach a settlement. FINRA allows mediation to occur before and even during the arbitration process. According to FINRA, over 80 percent of mediations result in a settlement.

How Can I Sue My Broker?

It is important to note that investment losses do not automatically justify a FINRA claim against a broker. Although losses may be an indicator of an underlying problem with a broker, there must be specific violations or wrongdoings by the broker.

Some of the most common controversy types in FINRA arbitrations include breach of fiduciary duty, negligence, fraud, failure to supervise, misrepresentation, and breach of contract.

Investors can also learn more about how to begin the arbitration or mediation process if investors are seeking to recover damages. Investors can file FINRA claims on acts that occurred in the past six years.

Additionally, FINRA allows investors to file an online complaint against brokers for fraudulent activity, which is a different process than arbitration or mediation. Here, the investor provides a summary of the complaint as well as relevant information relating to transactions with the broker.

Should I Hire an Attorney?

Due to the complexity of FINRA arbitration and mediation proceedings, investors may be represented by an attorney at all times throughout either process. Therefore, it may be in your best interest to hire an attorney with FINRA arbitration experience. FINRA provides a helpful guide on deciding whether to hire an attorney for arbitration or mediation proceedings.

If you have any questions or concerns about FINRA arbitration or mediation, we are more than happy to help you.

Vernon Litigation Group represents clients in FINRA arbitration and mediation throughout the United States. Our firm has significant experience pursuing claims against brokerage firms, financial advisors, registered investment advisors, and more. If you believe your advisor or broker has failed to act in your best interests or otherwise abused your trust, please contact us for a confidential, no-cost consultation.

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