The first thing you need to do is to evaluate the nature of your complaint. If you are upset about not getting phone calls returned or other service type issues, that is one thing. If, on the other hand, your broker has made unauthorized transactions in your account, or engaged in other serious infractions, that is quite another.
It is now a standard part of opening an account with a brokerage firm to sign an agreement that obligates you to arbitration. This means that it is unlikely that you can actually file a lawsuit against your broker. You can, however, take them to arbitration. The arbitration process is much easier to engage in without an attorney, although many people do hire an attorney to assist them. An alternative to arbitration is mediation. Mediation does not obligate either party to the final outcome and is simply a means for a settlement to be reached. If mediation is selected and does not resolve the dispute, arbitration can still be pursued.
After filing the arbitration complaint with regulatory arm of the National Association of Securities Dealers (now known as FINRA – Financial Industry Regulatory Authority). FINRA has approximately 3,000 employees and operates from Washington, DC, and New York, NY, with 15 District Offices around the country. Prior to your arbitration hearing, both sides are subject to discovery requests. This means, in preparing your case you haave the right to receive documents and other information about your account from your broker. Likewise, your broker can request documents from you in preparation of their defense (e.g your tax returns, information on other investments you own, etc…). For more information on arbitration here is a link. FINRA Arbitration Shortly after the complaint has been filed, discovery will begin and a date will be set for the arbitration hearing. This may take from several months to a year or longer.
If you have a legitimate complaint, all you may have to do is to bring this to the attention of the supervisor of your broker. Brokerage firms do not want to deal with arbitrations and will settle claims when possible. Don’t expect your brokerage firm to take responsiblity if you lost money on an investment that you knowingly agreed to make. Most firms are very careful, and get investors to sign a series of acknowledgements on risk and other considerations relating to investments they recommend to you.
If you want an honest opinion of whether or not you have grounds for an arbitration complaint, you should seek the advice of an attorney that practices securities law. Alternatively, an experienced financial planner may be able to at least give you a letter of opinion as to whether or not the actions of your broker were inconsistent with industry and professional standards.
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James L. Paris
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