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Investment brokers have a duty to treat their clients honesty and with integrity. Those who take advantage of, mislead, or steal from their clients shake the investing industry’s foundation. Regrettably, broker misconduct occurs all too often. 

You need representation from an attorney who has the knowledge, skill, and extensive experience to help you recover your losses if you are a victim of investment broker misconduct. Robert Wayne Pearce and his staff with The Law Offices of Robert Wayne Pearce, P.A., have over 40 years of experience fighting on behalf of investors victimized by broker misconduct. Contact us today to protect your rights. 

What Is FINRA?

FINRA is an acronym for Financial Industry Regulatory Authority. FINRA is a self-regulating organization or SRO. As an SRO, FINRA is a non-profit corporation that works with the Securities and Exchange Commission to protect investors from brokerage firms’ wrongdoing.  FINRA offers professional examinations that certify applicants as investment brokers. It also provides continuing education programs to investment professionals to promote fairness and transparency in the securities markets. 

FINRA has the authority to make rules and regulations that govern broker-investor relationships. It takes action to discipline brokers guilty of misconduct. Additionally, FINRA educates investors about their investment goals, strategies, and safe investing.

FINRA Statute of Limitations

FINRA offers arbitration and mediation services to investors who file a complaint against their broker or brokerage firm. The victimized investor must file their claim with FINRA’s arbitration board within a specified period of time. The investor contemplating pursuing a legal cause of action for their losses should be aware of other deadlines that affect their claim.

FINRA Arbitration Deadline

FINRA’s procedural rules indicate that investors have six years to file a claim for arbitration with FINRA. The six-year period starts when the event that gives rise to the legal claim occurred. FINRA will dismiss any claim that FINRA decides missed the eligibility deadline. The arbitration panel will rule on eligibility if the parties disagree whether the eligibility period elapsed.

FINRA tolls, or stops, the eligibility period if the parties file the case in court. Moreover, FINRA’s procedural rules state that courts will toll the statute of limitations when the case remains in FINRA’s jurisdiction.

Statute of Limitations Concerns

FINRA’s arbitration eligibility rules are distinct from federal or state statutes of limitations. Investors aggrieved by their broker must understand that they do not have six years to file a court claim. In many instances, the statutes of limitations are much shorter than FINRA’s arbitration eligibility time frame.

Section 10(b) of the Securities and Exchange Act of 1934 and its regulations grant investors the right to sue their broker or advisor for fraud or any other unfair practice. Section 10b and its regulations found at 17 C.F.R. 240.10b-5 have a two-year statute of limitations. 

Under these rules, the two-year statute of limitations starts when the investor discovers the fraud or no more than five years after the alleged fraud occurred.

The time when the investor discovered the fraud is essential to understand. Otherwise, you might unwittingly allow the statute of limitations to run out before having the chance to file your claim. The statute of limitations starts when the investor knew or should have known about the fraud. 

You must understand your investments and how they work so you can uncover evidence of fraud as soon as possible. If you are unsure if you are the victim of fraud, you must contact a knowledgeable and reputable securities attorney to protect your rights and investment.

State Statutes of Limitations

Some states will allow you to file a lawsuit in state court for a violation of state law. Filing in state court might be the better option for an aggrieved investor. Statutes of limitations for state law claims could be as short as two years. 

How Long Do I Have to File a Claim Against My Broker?

Filing your claim as soon as possible is the best way to protect your legal rights. Simply because FINRA agreed to arbitrate a claim within six years does not mean you should wait six years to file. Instead, you should be proactive. If you suspect that you lost money in the market because of broker fraud, negligence, or an unsuitable transaction, talk with a securities lawyer who has a wealth of knowledge and experience prosecuting financial brokers and advisors for wrongdoing.

What Is FINRA Arbitration?

FINRA offers arbitration and mediation services to investors who file a complaint against their broker or brokerage firm. Brokerage firms often include binding arbitration agreements in their brokerage contracts with investors. Commonly, arbitration agreements stipulate that the parties must resolve all disputes through binding arbitration offered through FINRA. Investment brokers include arbitration clauses in their contracts as the sole method of dispute resolution. 

Victimized investors must arbitrate disputes instead of pursuing their claims in court if they signed an agreement that included an arbitration clause. However, FINRA will accept arbitration only in cases where the investment advisor is an active member of FINRA.

What Are the Advantages of Arbitration?

Arbitration with FINRA is advantageous for investors. Claims progress more quickly through the arbitration process than in court. Experienced arbitrators know what is essential and understand the legal duty a broker owes to an investor. Additionally, you might have a chance to challenge an arbitration award in court if the ruling is contrary to the law.

Arbitration offers brokers a few advantages. First, arbitration is less expensive, generally, than litigating a case through court. Secondly, FINRA arbitrators possess more in-depth knowledge about the subject matter than the average juror sitting in a courtroom. Finally, arbitration hearings are not public forums, unlike courts of law, which are always open to the public. Investment firms are less likely to experience lousy press if all the disputes go to arbitration.

How Does FINRA Arbitration Work?

FINRA’s arbitration process is similar to the average court case. FINRA does not participate in the arbitration. Instead, FINRA provides a forum for the parties to resolve their disputes.

An investor begins the process by filing a formal complaint with FINRA. FINRA serves the complaint on the alleged wrongdoer and indicates that the defendant shall file an answer to the complaint. The parties conduct discovery and then prepare to present the case to an arbitration panel.

The value of the claim determines the arbitration panel. FINRA uses a summary arbitration process for claims under $50,000. One non-public arbiter, or an arbiter who is a member of FINRA, receives the assignment and hears the case after the parties review a list of arbiter candidates. The parties may participate in the arbitration remotely. 

Parties with claims valued over $50,000 must appear personally at the arbitration. Three arbiters must hear claims valued over $100,000. Two of the arbiters will be non-public arbiters, and the third will be a public arbiter who does not belong to FINRA. The parties will receive lists of candidates to preside over the arbitration. The parties could strike all non-public arbiters from the list and have only public arbiters hear their case.

The arbitration panel listens to the evidence, receives exhibits, and hears arguments. The arbiters find the facts of the case and apply the relevant law. After deliberation, the panel issues a decision. Any award is the judgment of the panel. 

Challenging an Arbitration Award in Court

Both federal and state courts have limited authority to overturn arbitration awards. Courts can overturn an award only if:

  • The award is the product of fraud or corruption;
  • The arbitration panel harbored a bias against one of the parties;
  • The arbitration panel violated the rights of one of the parties;
  • The arbitrators overstepped their authority;
  • The arbitrators disregarded the relevant law; or
  • The award was the product of an irrational decision. 

Courts are reluctant to overturn arbitration awards. Therefore, an investor who takes their case to arbitration must have representation from an attorney with tremendous insight and skill to win the case in arbitration.

Why Pursue a Claim Against an Investment Broker?

Market integrity and investor safety bolster confidence in the securities trading markets in the United States. Most investors understand market volatility and accept the risks associated with securities investing. Despite volatility, “putting your money in the market” remains the most advantageous method of growing wealth, saving for college, and planning for retirement.

Although some people manage their money personally, others rely on an expert investment broker to grow their money. Fearing losing their nest egg, investors turn to professional brokers to protect their assets. The average investor relies on their broker’s professional judgment to make the best financial decisions consistent with their investment needs.

If your investment broker violated your trust and their duty to act in your best interest, they should be held accountable. Pursuing a claim against a brokerage firm that mismanaged your investments can help you recover lost funds and hold the firm accountable for their wrongdoing.

Get the Representation You Need to Recover the Money You Lost

When you put your trust and hard-earned money in a broker’s hands, you expect they will do everything they can to protect your investment. You have a right to file a claim to recover damages for your losses because of your broker’s wrongdoing. Contact Robert Pearce and his investment loss recovery attorneys with The Law Offices of Robert Wayne Pearce today at 561-338-0037 to protect your valuable rights.

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