SECURITIES ARBITRATIONS

Securities Arbitration

 

When investors suffer financial losses due to stockbroker fraud, negligence, or other misconduct, they often have to resolve their disputes through arbitration rather than litigation. If you have an investment account, it is highly likely that you have signed an arbitration agreement requiring disputes to be settled through FINRA securities arbitration rather than traditional court proceedings.

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Understanding the Arbitration Process

 

The arbitration process is a structured and efficient method of resolving disputes between investors and financial professionals. FINRA (Financial Industry Regulatory Authority) administers these cases, providing a forum for investors to seek compensation for their investment losses. Unlike court litigation, FINRA arbitration typically moves more quickly and can be more cost-effective.

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The process begins when an investor files a Statement of Claim outlining the alleged misconduct, such as stockbroker fraud, unsuitable investment recommendations, excessive trading, or misrepresentation. The brokerage firm or financial advisor then submits a response. The case then proceeds to the discovery phase, where both parties exchange relevant documents and information. Unlike court litigation, depositions are generally not permitted in FINRA arbitration, but document production and written discovery are essential parts of the process.

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The arbitration hearing is held before a panel of one or three neutral arbitrators, depending on the size of the claim. For larger claims, a panel of three arbitrators—selected from FINRA’s roster of experienced professionals—will hear the case. During the hearing, both parties present their evidence, witness testimony, and legal arguments. After reviewing the case, the arbitrators issue a binding decision, which is final and enforceable.

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Types of Arbitration Claims and Potential Damages

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Investors may file claims for various types of broker misconduct, including but not limited to:

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• Stockbroker fraud and misrepresentation – When a broker intentionally deceives an investor through false statements, omissions, or misleading information about an investment.

• Unauthorized trading – When a broker executes trades in an investor’s account without obtaining prior approval, violating industry regulations.

• Unsuitable investment recommendations – When a broker advises an investor to purchase securities that do not align with their risk tolerance, financial goals, or investment profile.

• Breach of fiduciary duty – When a financial professional fails to act in the best interest of their client, placing their own financial gain ahead of the investor’s welfare.

• Excessive trading (churning) – When a broker engages in unnecessary or excessive buying and selling of securities to generate commissions rather than serve the investor’s best interests.

• Failure to supervise – When a brokerage firm neglects to oversee its brokers, leading to misconduct that harms investors.

 

Damages awarded in FINRA arbitration may include:

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• Recovery of lost investment funds – Reimbursement for financial losses caused by broker misconduct or unsuitable investment recommendations.

• Interest on damages – Compensation for the time value of money lost due to improper actions by the broker.

• Attorneys’ fees and costs – In certain cases, investors may recover legal fees and arbitration costs if permitted by law or contract.

• Punitive damages – Additional monetary awards imposed in cases of egregious misconduct, meant to punish wrongdoing and deter future violations.

 

If you want to learn more about FINRA securities arbitration process, check our securities blog where we discuss Frequently Asked Questions: Filing an Arbitration Claim with FINRA and Understanding Arbitration Claims in Securities Disputes: Elements, Burden of Proof, and Damages.

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Experienced FINRA Arbitration Attorney

 

At AMW Law, PLLC, we have over 20 years of experience handling FINRA securities arbitration cases. Our firm is dedicated to holding financial professionals accountable and helping clients recover their losses. Lead attorney Mr. Wlazlo is not only an experienced FINRA arbitration lawyer and securities fraud attorney but also currently serves as a FINRA arbitrator. His unique perspective from both sides of the arbitration process provides invaluable insight into how cases are evaluated and decided.

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We offer a free initial consultation to discuss your case and evaluate your legal options. If you have suffered financial harm due to the misconduct of a broker or financial advisor, contact AMW Law, PLLC today.