Often, yes, when the loss came from misconduct rather than ordinary market risk. Investors can recover losses caused by unsuitable recommendations, excessive trading, misrepresentations or unauthorized trades. Most claims against brokerage firms go to FINRA arbitration, because nearly every brokerage account agreement requires it. Claims against companies that sold you an investment can also arise under Texas and federal securities laws.
What kinds of misconduct qualify?
- Unsuitable or not-in-your-best-interest recommendations. Since 2020, federal Regulation Best Interest requires brokers to put a retail customer’s interest first.
- Churning: excessive trading to generate commissions.
- Overconcentration in one stock, sector or risky product.
- Misrepresentation or omission of risks, fees or the nature of an investment.
- Unauthorized trading without your permission.
- Failure to supervise by the brokerage firm.
- Private placement fraud, where an issuer or its promoters misstate the facts to raise money.
How does FINRA arbitration work?
- Statement of claim. You file a written claim with FINRA describing the misconduct and your losses.
- Arbitrator selection. Smaller claims are heard by one arbitrator; larger ones usually by a panel of three. Both sides help choose from FINRA’s roster.
- Document exchange. Discovery is narrower than in court, though account records and the broker’s communications are usually produced.
- Hearing. Testimony and evidence are presented, often in or near the investor’s home city.
- Award. The decision is final in almost all cases. Courts can overturn it only on very narrow grounds.
Arbitration is usually faster than court. But because there is effectively no appeal, the case has to be built right the first time.
What deadlines apply?
FINRA generally won’t hear a claim filed more than six years after the events at issue. Shorter state and federal limitations periods may also apply, depending on the claim. Gather your account statements, trade confirmations and communications with the advisor as soon as you suspect a problem.
What if the problem is with the company, not the broker?
If a company or its insiders misled you to raise money, through a private placement, an investment in a startup, or an undisclosed fact that reduced the investment’s value, you may have fraud or securities claims directly against them in court. Insiders who violate securities laws may also be reported to the SEC, which runs its own whistleblower program.
From our case files
- Arbitration against a Wall Street firm. We prosecuted a securities mismanagement arbitration for a client against Goldman Sachs (2007; results confidential).
- Insiders who misled investors. We sued a startup CEO and co-founder who misled investors. The settlement stripped them of their shares and company positions (2006–2007).
- SEC whistleblower complaint. We drafted and filed a securities whistleblower complaint against a Texas-based national investment funds company and arranged our clients’ interviews with the SEC (2020).
Client names are withheld for confidentiality. Every case turns on its own facts, and past results do not guarantee a similar outcome. See more representative results.
The Burk Law Firm represents investors in securities arbitration and investment fraud cases. Call (512) 306-9828.
Related: How Do You Prove Business Fraud in Texas? · How Does a Qui Tam Whistleblower Lawsuit Work? · Securities Arbitration in Austin, TX
This article is general information, not legal advice. Reading it does not create an attorney-client relationship.