Securities Arbitration

What is Securities Arbitration?

Arbitration is an alternative dispute resolution process. When an investor suffers investment losses due to misconduct by a financial advisor or broker-dealer, the investor can file a securities arbitration claim against their financial advisor and/or broker-dealer in an effort to be compensated. The case will be presented and defended in an arbitration proceeding to a panel of arbitrators instead of a court of law in front of a judge and jury.

Arbitration is the primary forum for resolving disputes between investors and brokerage firms or financial advisors because the parties have contractually agreed to use arbitration as an alternative dispute resolution process. When an investor opens an account with a broker-dealer, the investor is required to sign an array of account opening documents. These account opening documents regularly include an arbitration clause, which requires that arbitration be used as an alternative to litigation. This requirement is often a contractually binding obligation for both parties. As a result, disputes between investors and financial advisors or brokerage firms are resolved in arbitration as an alternative to court.

The Financial Industry Regulatory Authority (FINRA) is authorized by Congress to regulate the financial services industry and operates the largest arbitration forum for securities disputes. Most securities arbitrations take place using FINRA’s Dispute Resolution Services’ arbitration forum because, as FINRA members, financial advisors and brokerage firms are required to arbitrate customer complaints upon the filing of a claim through FINRA.

Depending on the size of the investor’s claim, either a single arbitrator or a panel of three arbitrators will resolve the dispute by making a final and binding decision after both parties have an opportunity to present evidence. The mechanics of an arbitration hearing are similar to those of a court case. Both parties will present arguments and evidence through opening statements, elicit testimony from fact witnesses, offer documents, present expert testimony, and make closing statements. However, arbitration is usually faster, cheaper, and less burdensome than litigating in a court of law.

Investors should be aware that filing a securities arbitration complaint is not the same as filing a complaint about fraud or unfair practices through FINRA’s Investor Complaint Center. If an investor is seeking monetary compensation, the investor must initiate a securities arbitration through FINRA Dispute Resolution Services. On the other hand, if an investor merely wants to make FINRA aware of potentially fraudulent or suspicious activity by a financial advisor or brokerage firm, the investor can use FINRA’s Investor Complaint Center.

Securities arbitration is a unique and complex practice area. Investors should seek out experienced counsel who understands the FINRA forum and can navigate the arbitration process to effectively advocate on their behalf.

Typical Securities Arbitration Claims

Your brokerage-firm and financial advisor are required to have your best interest in mind when they make investment recommendations or offer investment advice. Unfortunately, that’s not always the case. Instead, financial advisors or broker-dealers often recommend unsuitable investments or investment strategies, withhold or misrepresent material information, or place their financial interests ahead of yours. The result of this negligent conduct or fraud can lead to investment losses.

Investors may bring a wide variety of claims against stockbrokers and broker-dealers in arbitration, including:

• Breach of Fiduciary Duty;
• Negligence;
• Failure to Supervise;
• Misrepresentation or Omission of Facts;
• Breach of Contract;
• Suitability / Best Interest;
• Securities Fraud;
• Violation of Blue Sky Laws;
• Elder Abuse;
• Unauthorized Trading;
• Excessive Trading and Churning;
• Errors-charges;
• Execution Error; and
• Failure to Diversify.

If you have noticed any of the following in your investment accounts, you may have a securities arbitration claim:

• Sudden and unexplained losses;
• Transactions in your account that you did not authorize, including buy trades, sell trades, withdrawals, or transfer of assets;
• An excessive number of stock trades or transactions;
• Losses resulting from a lack of diversification;
• Losses arising out of investments that you did not understand; or
• Losses as a result of material risk factors that were not disclosed to you.

Initiating a securities arbitration can be daunting for any investor regardless of sophistication and net worth. Investors may also be deterred from filing a securities arbitration claim because of unfamiliarity with the forum or costs involved in pursuing a claim. We are here to help.

Iorio Altamirano LLP is a securities arbitration law firm based in New York City. We are experienced securities arbitration attorneys, and we represent investors nationwide who have suffered investment losses as a result of wrongful conduct by financial advisors and brokerage firms. We offer a bold approach and aggressively pursue the recovery of investment losses on behalf of our clients. We are investor advocates.

If you believe that you may have been a victim of securities fraud or other wrongful conduct by your financial advisor or brokerage firm, contact our experienced securities arbitration attorneys for a free case evaluation.

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