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Investors With “Blown-Out” Securities-Backed Credit Line and Margin Accounts: How do You Recover Your Investment Losses?

If you are reading this article, we are guessing you had a bad experience recently in either a securities-backed line of credit (“SBL”) or margin account that suffered margin calls and was liquidated without notice, causing you to realize losses. Ordinarily, investors with margin calls receive 3 to 5 days to meet them; and if that happened, the value of the securities in your account might have increased within that period and the firm might have erased the margin call and might not have liquidated your account. If you are an investor who has experienced margin calls in the past, and that is your only complaint then, read no further because when you signed the account agreement with the brokerage firm you chose to do business with, you probably gave it the right to liquidate all of the securities in your account at any time without notice. On the other hand, if you are an investor with little experience or one with a modest financial condition who was talked into opening a securities-backed line of credit account without being advised of the true nature, mechanics, and/or risks of opening such an account, then you should call us now! Alternatively, if you are an investor who needed to withdraw money for a house or to pay for your taxes or child’s education but was talked into holding a risky or concentrated portfolio of stocks and/or junk bonds in a pledged collateral account for a credit-line or a margin account, then we can probably help you recover your investment losses as well. The key to a successful recovery of your investment loss is not to focus on the brokerage firm’s liquidation of the securities in your account without notice. Instead, the focus on your case should be on what you were told and whether the recommendation was suitable for you before you opened the account and suffered the liquidation.

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Regulation Best Interest (Reg. BI): Better But Not the Best!

Finally, ten years after the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) was enacted to bring about sweeping changes to the securities industry, the best regulation the U.S. Securities & Exchange Commission (“SEC”) could pass, SEC Regulation Best Interest, is now the law governing broker-dealers giving investment advice to retail customers. Although the SEC had the authority to impose a uniform and expansive “Fiduciary Duty” standard throughout the country upon broker-dealers and investment advisors, it yielded to the stock brokerage industry demands and enacted Regulation Best Interest (“Reg. BI”), which is better than the Financial Industry Regulatory Authority (“FINRA”) “Suitability Rule,” but not the best that it could have been done to protect investors. Last month FINRA amended its Suitability Rule to conform with SEC Reg. BI and made it clear that stockbrokers now uniformly have duties related to disclosure, care, conflicts and compliance, which are equivalent to the common law “fiduciary duty” standard when making recommendations to retail customers. See, FINRA Regulatory Notice 20-18. 1

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FINRA Arbitration: What To Expect And Why You Should Choose Our Law Firm

If you are reading this article, you are probably an investor who has lost a substantial amount of money, Googled “FINRA Arbitration Lawyer,” clicked on a number of attorney websites, and maybe even spoken with a so-called “Securities Arbitration Lawyer” who told you after a five minute telephone call that “you have a great case;” “you need to sign a retainer agreement on a ‘contingency fee’ basis;” and “you need to act now because the statute of limitations is going to run.”

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A Stockbroker’s Introduction to FINRA Examinations and Investigations

Brokers and financial advisors oftentimes do not understand what their responsibilities and obligations are and what may result from a Financial Industry Regulatory Authority (FINRA) examination or investigation. Many brokers do not even know the role that FINRA plays within the industry. This may be due to the fact that FINRA, a self-regulatory organization, is not a government entity and cannot sentence financial professionals to jail time for violation of industry rules and regulations. Nevertheless, all broker-dealers doing business with members of the public must register with FINRA. As registered members, broker-dealers, and the brokers working for them, have agreed to abide by industry rules and regulations, which include FINRA rules.

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What Is Financial Advisor Malpractice?

As an investor, you expect your financial advisor to properly manage your investment portfolio. Unfortunately, this is not always what happens. Financial advisors owe their clients certain obligations with respect to their investment accounts. Failure to adhere to these obligations can result in a claim for financial advisor malpractice. In certain circumstances, the financial fraud committed by your financial advisor will be obvious. For example, if your financial advisor forged your signature on a document, he or she clearly committed misconduct. However, most financial malpractice claims are not this straightforward.  The investment loss recovery attorneys at The Law Offices of Robert Wayne Pearce, P.A., have helped hundreds of investors recover losses caused by financial advisor malpractice. Contact us today for a free consultation. What Are My Financial Advisor’s Obligations and Duties to Me?  Registered financial advisors must adhere to certain fiduciary duties, or obligations, with respect to their clients. Financial advisors who are not registered and are not making securities recommendations to retail customers still owe their clients certain obligations, but they are not as stringent as fiduciary duties. Fiduciary Duties Registered investment advisors are bound by fiduciary duties to their clients. The Investment Advisers Act of 1940 defines the role and responsibilities of investment advisors. At its core, the purpose of this act was to protect investors.  A financial advisor owes their client a duty of care and a duty of loyalty. The Securities and Exchange Commission (SEC) interprets these fiduciary duties to require a financial advisor to act in the best interest of their client at all times. The SEC provides additional guidance for each fiduciary duty specifically. The duty of care requires that an investment advisor provide investment advice in the client’s best interest, in consideration of the client’s financial goals. It also requires that a financial advisor provide advice and oversight to the client over the course of the relationship. The duty of loyalty requires an investment advisor to disclose any conflicts of interest that might affect his or her impartiality. It also means that the financial advisor is prohibited from subordinating his or her client’s interests to their own. The Suitability Rule Broker-dealers in the past were subject to less demanding obligations.  The Financial Industry Regulatory Authority (FINRA) regulates broker-dealers in the United States. FINRA previously imposed a suitability obligation on broker-dealers that only required them to make recommendations that were “suitable” for their clients.  Under the suitability rule, a broker-dealer could recommend an investment only if it was suitable for the client in terms of the client’s financial objectives, needs, and risk profile. Broker-dealers did not owe a duty of loyalty to their clients and did not have to disclose conflicts of interest.  Recently, however, FINRA amended its suitability rule. Regulation Best Interest FINRA recently amended its suitability rule to conform with SEC Regulation Best Interest (Reg. BI), making it clear that stockbrokers now uniformly owe certain heightened duties when making recommendations to retail customers.  As with fiduciary duties, under Reg. BI, all broker-dealers and their stockbrokers now owe the following duties:  Disclosure,  Care,  Conflicts, and  Compliance.  However, it’s important to remember that they owe these duties only when they make recommendations regarding a securities transaction or investment strategy involving securities to a retail customer.  While these changes are still new, one thing is certain—the Reg. BI standard is definitely a heightened standard compared with the previous suitability standard.  Forms of Financial Advisor Malpractice Investors usually hire financial advisors because they do not have experience in investing. With this lack of experience, how can an investor know when a financial advisor is committing malpractice? There are several ways financial advisors can commit financial malpractice. Lack of Diversity Financial advisors have a duty to ensure your investment portfolio is properly diversified to include a variety of investment assets. That may include a mixture of stocks, bonds, or mutual funds in multiple different sectors.  A portfolio that lacks diversification is likely to result in significant losses to the client in the event of a market downturn in a specific sector. If you believe your financial advisor failed to properly diversify your portfolio, contact an investment loss recovery attorney today. The attorneys at The Law Offices of Robert Wayne Pearce, P.A., have significant experience handling these types of cases and will ensure the financial advisor responsible for your losses is held accountable.  Your Investments Are Unsuitable Every investor is unique. That means financial advisors must consider the specific goals and needs of each individual client before recommending investments. A financial advisor must consider a client’s risk tolerance when recommending investments. Risk tolerance refers to an investor’s willingness to endure losses in the financial market. For an aggressive investor, a financial advisor might recommend a risky investment that has a better possibility of high returns. The same recommendation would be unsuitable for an investor with a low risk tolerance. If your financial advisor recommended investments that you believe are unsuitable, contact the Law Offices of Robert Wayne Pearce to have your case reviewed by an experienced investment losses attorney. Your Investment Advisor Is Excessively Trading Excessive trading, sometimes called churning, occurs when a financial advisor buys and sells stocks excessively with the goal of generating commission fees. Churning is prohibited by the SEC. Investors should frequently review their account statements to ensure that the number of trades in their account does not increase drastically. If your financial advisor has been excessively trading in your investment account, reach out to an attorney as soon as possible to prevent further losses.  Financial Advisor Negligence In some cases, your financial advisor may seem like he or she is doing nothing at all. The financial advisor could be focused on other clients or on personal matters. Regardless of the reason, this behavior is not appropriate. A financial advisor may be guilty of malpractice for failing to give the appropriate amount of attention to a client.  Client Testimonials The Law Offices of Robert Wayne Pearce, P.A., has been representing investors in disputes against...

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What To Do if You Believe Your Financial Advisor is Stealing Your Money (Step by Step)

Financial advisors are highly trusted professionals who help make decisions that impact your economic future. When that trust is broken through a bad or negligent act, the investor suffers and the financial advisor must be held accountable. If you believe your financial advisor stole your money, there are several options for you to recover. For assistance, contact the Law Offices of Robert Wayne Pearce, P.A. to learn how we can help you today. The Fiduciary Duty All financial advisors are held to a standard of care when dealing with investors. Registered financial advisors have a higher fiduciary duty to their clients under the Investment Advisers Act of 1940. This is the highest legal standard of care and requires financial advisors to act in the best interest of their clients, make suitable investments, and disclose relevant information to you.  Knowing whether your financial advisor is registered with the U.S. Securities and Exchange Commission (SEC) or a state securities regulator is important because if the advisor breaches the fiduciary duty, you can bring a claim against the financial advisor through the Financial Industry Regulatory Authority (FINRA). FINRA is the governing organization that creates and enforces rules for advisors and their firms and assists in resolving disputes between advisors and investors.  Do You Have a Claim? If your financial advisor outright stole money from your account, this is theft. These cases involve an intentional act by your financial advisor, such as transferring money out of your account. However, your financial advisor could also be stealing from you if their actions or failure to act causes you financial loss.   Losing money through investment is not enough to bring a claim against your financial advisor. Remember, there is no guarantee of return when investing. Even if your financial advisor made the recommendation, under federal securities law and FINRA regulations, you cannot hold your advisor liable simply because they lost you money. You need a viable cause of action, such as a breach of fiduciary duty, negligence, or malpractice. Types of Claims Against Your Financial Advisor  Understanding securities law and FINRA regulations are crucial to know whether you have a valid claim against your financial advisor. The investment loss recovery attorneys at The Law Offices of Robert Wayne Pearce P.A. have over 40 years of experience in securities and investment law. They have helped countless investors recover their financial losses caused by bad or negligent acts by their financial advisors. The Law Offices of Robert Wayne Pearce P.A. have handled hundreds of cases involving many types of misconduct by financial advisors. Negligence In a negligence claim, you do not need to show that the financial advisor intentionally acted in a harmful way, but rather that the advisor failed to do something they had an obligation to do and caused the economic loss. For example, your advisor may have made an unsuitable investment by failing to take into consideration your risk tolerance. If you lost money based on the recommended investment, it may be appropriate to file a claim for negligence against your financial advisor.  Breach of Fiduciary Duty A financial advisor who breaches his fiduciary duty has failed to meet the required standard of care. You may have a valid claim for breach of fiduciary duty if your advisor failed to execute your stated objectives or did not disclose information about a product. Other examples of breaching the fiduciary duty include: Unauthorized trading, Unsuitable investments,  Undiversified portfolio, and  Account churning.  In each of these instances, the financial advisor did not act in your best interest.  Failure to Supervise A brokerage firm is responsible for supervising the actions of its financial advisors and any other employees. If the firm fails to do this, it can be held liable for your financial losses.  What You Can Do There are several stages of resolution to recover your financial losses. Depending on the facts of your case, you may be able to resolve it and recover without any formal proceedings, or you may have to litigate. The attorneys at The Law Offices of Robert Wayne Pearce P.A. have helped investors in all stages and have successfully recovered over $140 million in losses for our clients.  Review Customer Agreement If you believe your financial advisor stole money from you, either directly or indirectly through losses in your account, you should first review your customer agreement. Understand what sort of authority you gave your financial advisor and if there is a mandatory arbitration clause. This clause is common in most customer agreements with brokerage firms. These clauses often state that you waive your right to file a lawsuit against your advisor and agree to engage in a FINRA arbitration proceeding instead.  Informal Dispute Resolution Claims against financial advisors are incredibly complex legal matters. There are informal options available, however. Even at this stage, you should contact an investor loss recovery attorney for assistance. FINRA, which regulates the investment industry, instructs investors to first pursue informal dispute resolutions before filing a claim against their financial advisor.  Depending on the severity of the financial advisor’s misconduct, you may be able to resolve the matter directly with your advisor or the firm’s compliance department. If this is not suitable or you fail to come to a resolution, the next stage is participating in voluntary, non-binding mediation.  FINRA Mediation Mediation is a voluntary process that involves a neutral third party who assists in reaching a mutually agreeable solution. FINRA offers a forum for advisors and investors to mediate. This option is faster and less expensive than arbitration and litigation. Four out of five cases mediated by FINRA are resolved. If you fail to reach a satisfactory solution through mediation, you still have the right to arbitrate or litigate.   FINRA Arbitration Arbitration is more like a traditional legal proceeding in that an impartial party or panel hears arguments from both sides, analyzes the facts and evidence, and makes a final, binding decision. If you choose arbitration or are required to arbitrate under your customer agreement, you forfeit your...

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Securities & Exchange Commission Complaint: How to Report Your Broker Anonymously

Your investments are important—that’s why so many individuals hire investment brokers and financial advisors to manage their investment accounts.  Having a qualified broker can be a great advantage to the growth of your investments. Unfortunately, however, investment and securities fraud remains a common and serious issue in the United States each year. So what do you do if you are a victim of investment fraud at the hands of your broker?  The U.S. Securities and Exchange Commission (SEC) has a mission of protecting investors; maintaining fair, orderly, and efficient markets; and facilitating capital formation. In furtherance of this goal, the SEC allows individual investors to file complaints against their broker or their broker’s firm. If your broker committed negligence or broker fraud, you may be entitled to file a complaint and recover your losses. Violations of securities law can be reported to the SEC, which will conduct a comprehensive investigation.  Looking for information on how to file an SEC complaint against a broker? Look no further than the Law Offices of Robert Wayne Pearce, P.A. Not only can our attorneys help you report your broker, but we can also help you recover your investment losses.  Filing a complaint against your broker with the SEC can be a great way to hold them accountable and put future investors on notice of their wrongdoing. However, doing so doesn’t necessarily help you get your money back. Contacting an attorney, however, can be the first step toward actually recovering your personal investment losses that you suffered at the hands of your broker.  Stockbroker fraud attorney Robert Wayne Pearce has over 40 years of experience handling complex securities, commodities, and investment arbitration and litigation cases. He has helped countless clients through their investment-related disputes, and he will fight to do the same for you. Please don’t hesitate to send us an online message or call (800) 732-2889 today for assistance. Why Would I File a Complaint? There are numerous reasons you may need to file a complaint with the SEC against your broker. Common examples of wrongful actions by a broker or brokerage firm include: Offering fraudulent or unregistered securities;  Misappropriating client funds; Insider trading; Making false or misleading statements; and Failing to file required reports with the SEC. Of course, not all actions by a broker constitute fraud for which you can file a complaint with the SEC. Remember, the stock market is inherently volatile, so the fact that you lost money does not necessarily mean your broker took any wrongful actions.  An experienced investment fraud attorney can help you determine whether filing a complaint with the SEC against a broker might be warranted. Filing a Complaint with the SEC Against a Broker: What You Need to Know If you suffer financial losses due to the negligence or misconduct of a broker or brokerage firm, filing a complaint with the SEC against the broker can be an important step to take.  Not only can this help prevent future investors from being subject to the same fraudulent and predatory actions, but it may also provide you with an avenue to recover your losses. How to File a Complaint Against a Broker The first step in reporting your broker for fraud or misconduct is to file your formal complaint with the SEC.  The SEC provides an opportunity for members of the public at large to submit broker complaints electronically using the SEC’s Investor Complaint Form.  What to Include in Your Complaint The Investor Complaint Form may appear simple to complete. However, there is more to it than you might think.  The form requires basic information such as: Your name and address; Basic information about your broker; The type of investment involved; A brief description of the events giving rise to your complaint; and Any actions you may have already to resolve your complaint against your broker, such as mediation, arbitration, or court action. The complaint form can play a vital role in whether the SEC allows your case to move forward. Thus, the more information you are able to provide, the better equipped the SEC will be to investigate your complaint. An experienced investment fraud attorney can be a great benefit to you as you complete your Investor Complaint Form and move forward in the process.  What Happens After Submitting My Complaint After the SEC receives your complaint, they will thoroughly investigate your claim and all relevant evidence.  Central to the process is confidentiality. The SEC conducts its investigations in a manner that will protect the parties and preserve the integrity of the complaint process.  Then, depending on the allegations asserted in your form, the complaint will be referred to the appropriate SEC office. The Office of Investor Education and Advocacy The Office of Investor Education and Advocacy handles basic investor questions regarding securities law and complaints related to financial professionals. These SEC officers will also advise complainants of possible remedies and, in some cases, will intervene on your behalf and reach out to brokers or other financial advisors concerning the issues raised in your complaint. This office may also refer your complaint to another division of the SEC for resolution. Enforcement Division The Division of Enforcement, on the other hand, employs attorneys to review information and tips regarding securities law violations.  Officers in this office investigate the claims in their entirety, retrieving whatever evidence may be necessary. Again, it is important to note that the investigations conducted by the SEC are typically confidential unless made a matter of public record.  After completing a thorough investigation, the Enforcement Division may recommend that the SEC bring civil actions in federal court or before an administrative law judge to prosecute securities law violations.  Why Hire an Investment Loss Attorney to Assist with Complaints Against Your Broker? Reporting the fraudulent misconduct of a broker to the SEC is important. However, filing an SEC complaint is not the only way to hold a broker or brokerage firm accountable.  In fact, in some cases, filing an SEC complaint may not be...

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The Most Common Types of Investment Frauds in 2021 [How to Take Action]

Consult a Highly-Experienced and Dedicated Investment Fraud Attorney to Learn How to Protect Your Rights If You Suspect Your Broker or Financial Planner of Fraud Hiring a reputable investment advisor is frequently a wise decision. You did things right by hiring someone you thought you could trust, but you still lost money. Knowing more about types of investment frauds could help you understand what you need to do. A skilled investment loss attorney could investigate your situation and determine if you are the victim of investment fraud.  At the Law Offices of Robert Wayne Peace, P.A., we devote our extensive experience and advanced skill to protecting investors who fell prey to unscrupulous investment professionals. Contact us today to learn more about how we can help hold your financial advisors accountable for fraud or malpractice. Investment Fraud is More Pervasive Than You Think Your story is probably like many others. You have worked hard and saved money to plan for your future. So instead of “playing the market” yourself, you engage a financial advisor to help protect your nest egg.  You probably felt at ease with your decision to hire a financial advisor. Your financial advisor is a fiduciary, and, accordingly, they owe you a duty of care. This is someone you believe you can trust with your savings and rely on to make the right decisions for you and your family. Most financial advisors are honest, hardworking, and caring professionals who try their best for their clients. Notwithstanding their strict ethical rules, some investment advisors cannot resist the temptation of making money the easy way.  If you have lost money due to investment fraud or negligence, we invite you to reach out or call (800) 732-2889. How Do You Know If You’re the Victim of Some Type of Investment Fraud? Everyone knows the old saying that “if it’s too good to be true, it probably is.” This adage still pertains to investment opportunities even today. Many fraudulent schemes perpetrated by dishonest financial advisors lure unsuspecting investors into their trap with some type of “get rich quick” scheme. We will examine five types of investment fraud commonly employed by shady financial advisors. Promissory Note Fraud If you have ever bought a home or a car and financed the transaction, you probably understand the significance of a promissory note. Buying and selling promissory notes is a sophisticated investment strategy. Your advisor must adhere to the strict regulations enforced by the U.S. Securities and Exchange Commission (SEC) when transferring promissory notes. Promissory notes might seem like a worthwhile investment. The deal allows you to hold the note and receive interest payments as well as repayments on the principal. You might have purchased the note for a discount, which increased your potential return. Investing in promissory notes, especially short-term notes, is extremely risky. Short-term notes offer higher than market interest rates and the allure of making a substantial amount of money quickly.  Promissory note scams prove to cost private investors millions of dollars. The seller of the note has no responsibility to register short-term notes with the SEC. Therefore, small investors cannot research the viability of these notes, the historical performance of similar notes, and whether the dealer has a good reputation.  Investors accept some risk. However, investors could get wiped out if they invest in promissory notes without proper guidance from a reputable financial advisor. Small or retail investors may not have any recourse against the party who defaults on a promissory note.  They have other options, however. Private investors like you could file a lawsuit against your financial advisor for fraud if they misrepresented or lied about the investment’s inherent risk, its return, or any other material fact concerning the promissory note. Proving investment fraud is difficult. That is why you need a strong legal advocate for individual investors on your side to pursue a claim on your behalf. Ponzi and Pyramid Schemes Ponzi schemes always fail. Yet, people still use them as a way to make easy money. Ponzi schemes always fail because the person running the scam will always run out of money.  The average investor might not identify a Ponzi scheme if it is well disguised. However, suppose you have given money to someone to invest, and there are no underlying assets in the fund, or you are asked to recruit others to join in the initial investment. In that case, you might be unwittingly involved in a Ponzi scheme.  Pyramid or multi-tiered marketing strategies are a similar investment tactic. Pyramid schemes are not inherently unlawful like Ponzi schemes. Notwithstanding, participants in multi-tiered marketing schemes often get swindled out of their money because they continue to invest, with little or no return, based on a promise that they will reach the top of the pyramid.  Like Ponzi schemes, a fraudulent pyramid scheme offers no legitimate underlying investment. On the other hand, some legitimate multi-tiered marketing programs sell consumer goods or other products.  Pyramid schemes are not investment groups or pooled funds. Pyramid schemes operate on the premise you make money based on the number of participants you recruit.  Suppose you or a loved one believes they have lost money because an investment advisor conned you into thinking that you could earn a good return by investing in a strategy that does not involve assets. In that case, you should talk with an investment attorney right away. Investing in Real Estate In America, we are conditioned to believe that the real estate market always goes up. As a result, real estate investing could be a vital component of a diversified portfolio. However, flipping houses, buying distressed properties, or becoming a landlord is not for everyone. Unprepared people could lose their shirts because of bad real estate investments. They have bad tenants, underestimate the rehab costs of a home, or overestimate their return when trying to sell and lose their investment. Moreover, they might end up in debt after making a bad deal. Buying and flipping houses are not the only...

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What to Do When Your Financial Adviser Fails to Act in Your Best Interest

Is hiring a financial advisor in your best interest? In many cases, it may be when it comes to your investments. According to the SEC, approximately 6 in 10 households in the United States own securities investments. With more Americans investing, there is an increased need for financial advisors who can provide valuable insight into how best to invest and manage your accounts.  A financial advisor acting in your best interest is one of the best assets you can have when it comes to your investments. However, not all financial advisors live up to this standard.  Before you hire a fiduciary to represent your investment interests, it is important to first understand the duties your financial advisor owes you. By doing so, you will be better equipped to recognize when yours may not be acting in your best interest.  If you need help determining whether a financial advisor acting in your best interest and what you can do if they did not, we want to help. The Law Offices of Robert Wayne Pearce, P.A., has represented countless defrauded investors who have fallen victim to the actions of their advisors. Investment loss attorney Robert Wayne Pearce has over 40 years of experience handling a broad range of securities and investment disputes. Give us a call today to see what we can do for you. Fiduciary and Financial Advisor: Your Best Interest Is What Matters Most When you hire a financial advisor to provide you counsel regarding your investments, you expect that they will act in your best interest. The relationship between you and your advisor is a “fiduciary” relationship.  This fiduciary relationship requires a financial advisor to act in a certain manner when it comes to their clients’ investments. But what exactly is a “fiduciary duty,” and how do I know if my financial advisor owes me a duty to act in my best interest? We’ll dive into these questions in more detail below.  Fiduciary Duties: An Overview A fiduciary is someone who acts on behalf of someone else. In the investment context, a financial advisor who is hired to provide counsel and advice regarding their investments is a fiduciary. At its core, a fiduciary relationship relies on trust and good faith between the advisor and the client.  Being a fiduciary means that an investment advisor must act in their client’s best interest, putting their client’s needs over their own needs. In short, a fiduciary duty is a legal responsibility owed by the fiduciary (financial advisor) to act in the principal’s (client) best interest.  A fiduciary’s main duties are to: Put the client’s best interests first, ahead of their own; Avoid conflicts of interest or disclose them to the client as soon as they arise; and Act with honesty, good-faith, and loyalty toward the client.  Failure by a financial advisor to act in your best interest may constitute a breach of their fiduciary duty. This can result in serious liability for the advisor. Is Everyone a Fiduciary?  No, not everyone will be considered a fiduciary.  A fiduciary relationship is a special relationship that arises only in specific circumstances. The Investment Advisers Act of 1940 requires only registered investment advisors to abide by fiduciary obligations to act in a client’s best interests. Thus, all investment advisors who are registered with the SEC or a state securities regulator are fiduciaries. Broker-dealers and stockbrokers, on the other hand, are not fiduciaries. The New “Best Interest” Rule: A Replacement for the Suitability Standard Until recently, there was a lower standard of care that applied to most brokers and agents. This was governed by FINRA Rule 2111, otherwise referred to as the “suitability” standard.  Unlike a fiduciary standard of care, suitability required only that a broker-dealer make investment decisions that were “suitable” for his or her client based on the client’s investment objectives. They did not have to put their client’s interests ahead of their own. Further, they were free to recommend products that might benefit themselves, so long as the product was suitable for the client. This changed on June 30, 2020, when the SEC enacted Regulation BI—the Best Interest Rule. Now, regular stockbrokers also have a duty to act in the best interests of their retail clients when making recommendations about their investments. Specifically, Regulation BI imposes four obligations upon broker-dealers and associated persons:  Provide disclosures to customers regarding the relationship at the time of or before making any recommendations;  Exercise due care, or reasonable diligence, care, and skill, in making recommendations to customers;  Establish, maintain, and enforce procedures and policies to address potential conflicts of interest; and  Establish, maintain, and enforce procedures and policies to achieve compliance with Regulation BI.  If you feel your financial advisor or broker has failed to act in your best interest and live up to their obligations, seek help promptly from an experienced attorney. How Do I Know If Someone Is a Fiduciary? The easiest way to know for sure if a financial advisor is a fiduciary is to ask them. You can also check on the SEC Investment Advisor Database for federally registered investment advisor firms. Another way is to ask about an advisor or advisor firm’s pay structure. If an advisor is paid based on commission, he or she is most likely not a fiduciary. Fiduciaries usually work on fees only, so an advisor who advertises that they work on commission may not be acting as a fiduciary. But again, remember that even if your advisor is not a federally registered investment adviser held to a fiduciary standard, they still owe you certain obligations. All stockbrokers now have a duty to act in the best interests of their retail investors when making recommendations regarding their investments. Breach of Fiduciary Duty and What to Do If Your Financial Advisor Doesn’t Act in Your Best Interest A fiduciary breaches his or her duty by acting in their own interest rather than in their client’s interest. Additionally, failure to act in your best interest may give rise to a...

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How to File a Complaint Against a Financial Advisor

When investors hire a financial advisor, they expect the advisor to act in their best interest to prevent unnecessary losses. Unfortunately, however, financial advisors do not always live up to these expectations.  In some cases, a financial advisor fails to follow an investor’s requests and guidelines or otherwise engages in misconduct, causing the investor to suffer losses. When this happens, the investor may be able to file a complaint against the advisor to recover his or her losses.  But how do you file a complaint against a financial advisor? And when do you know it may be time to do so?  If you or a loved one has suffered significant investment losses at the hands of your financial advisor, contact The Law Offices of Robert Wayne Pearce, P.A., today. With more than 40 years of experience, our investment loss recovery attorneys can help you understand when and how to file a complaint against an advisor. Give us a call to discuss your case, and see what our team can do for you.  A Brief Overview of FINRA and How It Affects Your Ability to File a Complaint Against a Financial Advisor Before discussing how to file a complaint against an advisor, it is important to have an understanding of the process in general and whether you can bring a claim at all.  Financial advisors and their employers are governed by the Financial Industry Regulatory Authority (FINRA). FINRA’s stated mission is to “safeguard the investing public against fraud and bad practices.” FINRA has the power to take disciplinary actions against registered financial advisors or broker-dealers who violate the industry’s rules.  In 2019, FINRA reported that it initiated 854 disciplinary actions, levied $39.5 million in fines, and ordered restitution of $27.9 million be paid to investors. FINRA also expelled 6 member firms, suspended 21 member firms, barred 348 individuals from the securities industry, and suspended 415 individuals.  In short, FINRA provides significant protections for investors and processes through which advisors can be held accountable for their misconduct. However, it is important to note that you may not be able to file a complaint against an advisor in court as you might expect.  Required Investor Arbitration When you open a brokerage account with a member firm regulated by FINRA, you will likely sign a customer agreement. This agreement controls many aspects of the investor-advisor relationship, including potential disputes you may have with your advisor or their firm in the future.  More often than not, these customer agreements contain a mandatory arbitration clause. An investor must arbitrate through FINRA when:  There is a written arbitration agreement;  The dispute is with a broker or firm who is a member of FINRA; and The dispute is related to the securities business of the broker or firm.  If all these are true, then you must bring any claim you may have against your broker or their firm to FINRA arbitration, rather than filing a lawsuit in the court system. Nevertheless, you do still have an opportunity for your claim to be heard and to hold your advisor accountable.  How FINRA Arbitration Works Many people believe that going to court is the best way to hold a financial advisor accountable. However, this is not necessarily the case. In fact, FINRA arbitration is much more common than you might think.  Arbitration is an alternative dispute resolution method that allows parties to a legal dispute to resolve their issues outside of court. Much like in a court case, the parties file pleadings, present testimony and evidence, and make oral arguments.  The key difference between a trial and arbitration is the forum. Whereas a trial is presented in front of a judge or jury, an arbitration is presented before a panel of independent arbitrators chosen by the parties.  However, just as a judge or jury renders a final judgment at trial, an arbitration panel also renders a final and binding award on the parties in the arbitration. Thus, arbitration can still be an effective method of resolving your claims with a financial advisor.  When Can I File a FINRA Complaint Against a Financial Advisor? Just because you lost money on an investment does not necessarily mean you should file a complaint against your financial advisor. Rather, you must show that you lost money because of your financial advisor’s negligence or misconduct.  Some of the most common types of investment fraud for which you may be able to file a complaint against your financial advisor include:  Ponzi schemes,  Pyramid schemes, “Pump and dump” scams, Advance fee fraud,  High yield investment frauds, and  Offshore scams.  Additionally, financial advisors have a fiduciary duty to their investors to reasonably invest and manage their investments. If your financial advisor breaches his or her duty, resulting in monetary loss, you may be entitled to file a complaint.  Of course, there are many ways in which a financial advisor can commit misconduct. For more information on what constitutes a breach of duty by a financial advisor, read our post, Can I Sue My Financial Advisor Over Losses? Filing Your Complaint Against a Financial Advisor The first step in initiating your complaint is completing what is called a “statement of claim.” The statement of claim details what occurred in your particular case.  This is your opportunity to tell FINRA your side of the story, so it is imperative that it is as complete and detailed as possible. You then submit your statement of claim to FINRA, after which time the case will move forward.  The steps following the filing of your complaint include:  The filing of an answer by the opposing party,  Arbitrator selection,  Prehearing conferences,  Discovery,  The arbitration hearing, and Final decision and awards. FINRA’s arbitration process can be faster and less formal than a court trial. However, it is still helpful to have an experienced attorney in your corner.  An investment fraud attorney can help you draft and file your statement of claim. This is arguably one of the most important parts of the FINRA arbitration process. ...

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Broker-Dealers and Stockbrokers have a Duty to Protect Seniors from Financial Exploitation

Protecting seniors from financial exploitation requires a collaborative effort between the government and financial experts. In general, securities brokerage firms and their stockbroker employees have a fiduciary duty to their customers. FINRA rules also establish a broker-dealer and stockbroker’s responsibility to protect seniors from financial exploitation by others. Unfortunately, the financial exploitation of seniors is a growing problem. If you or a family member believes you were taken advantage of by your stockbroker, investment advisor or another financial professional then you need to speak with a skilled investment fraud attorney right away. Based in Boca Raton, the legal team at the Law Offices of Robert Wayne Pearce, P.A., has years of experience representing clients for various types of investment, securities, and commodities fraud. We have handled hundreds of JAMS, FINRA, and AAA securities mediations and arbitrations for clients across the country and even some international clients. Financial Exploitation Is Elder Abuse According to the National Adult Protective Services Association, financial exploitation is a type of elder abuse on the rise. It covers the abuse of seniors and adults who have disabilities. This type of abuse usually involves trusted people in a person’s life, such as stockbrokers, investment advisors, other financial professionals, trustees, guardians, caretakers, neighbors, family members, and friends. This abuse happens because many seniors simply cannot protect themselves any longer. They are more trusting and relying on others. They are incapable of detecting fraudulent schemes. It is difficult for them to understand the nature, mechanics or risks of investments being offered and sold to them. Many cannot even read or comprehend the account statements or confirmations sent to them. So they allow others to manage their financial affairs and some of those people they trust and rely upon financially exploit them. There are numerous types of investment fraud perpetrated upon seniors. Some of the most common abuses and scams by stockbrokers, investment advisors and other financial professionals include: Getting seniors to allow fraudsters access to and/or management of their bank and/or brokerage accounts; Telling seniors to write personal checks to stockbrokers, investment advisors and other financial professionals to supposedly make investments not available through the brokerage firm; Taking money from seniors in exchange for worthless promissory notes or notes the fraudster has no intention of ever re-paying to the senior; The offer and sale of unsuitable complex structured products, alternative and non-conventional investments for the high commissions paid on those investments; Advising seniors to take out reverse mortgages or equity lines and use the proceeds to trade securities; Other scams that pressure a senior to use the equity from their reverse mortgage or equity line (or other liquid assets) to purchase an expensive variable universal life insurance policy, variable annuity, or indexed annuity with high commissions, high surrender fees, expensive riders and  that may not even mature until the senior is around 90 or 100 years old; Investments or securities schemes, such as Ponzi or pyramid schemes, promising unrealistic returns; Investments involving an unlicensed dealer. Victims of financial exploitation can experience all the same effects as someone who has endured another type of abuse, including depression, loss of trust, and feelings of shame. Financial Industry Regulatory Authority (FINRA) Recent rule changes to the Financial Industry Regulatory Authority (FINRA) went into effect in February 2018. These significant rule changes help establish additional protections for senior citizens. The two notable changes are FINRA Rules 2165 and 4512. FINRA Rule 2165 The SEC adopted new FINRA Rule 2165, which is the Financial Exploitation of “Specified Adults.” This rule will permit members to place a temporary hold on securities or disbursements of funds from an account when there is suspected financial exploitation. If a financial broker reasonably suspects that there is financial exploitation, then they can withhold disbursement. However, the rule does not create an obligation to stop the disbursement. Instead, it provides the right for brokers to do so. Stockbrokers should be proactive and look for potential abuse, so they can stop it early on, helping protect unsuspecting senior investors from becoming victims. Rule 2165 defines specified adults as particular investors who are most at risk for financial exploitation. That includes the following people: Someone who is 65 years of age or older; and Someone who is 18 and older that the broker has reason to believe has a physical or mental impairment that renders the investor unable to protect their own interests adequately. Brokers also have to know what the rule defines as financial exploitation. One example is the unauthorized or wrongful withholding, taking, use, or appropriation of a specified adult’s securities or funds. Financial exploitation can also be any act or omission made through someone’s guardianship, power of attorney, or any other authority with the purpose of: Converting the specified adult’s assets, money, or property; or Obtaining control of the specified adult’s property, money, or assets through the use of intimidation, deception, or undue influence. Rule 2165 allows a broker to put a temporary hold on suspicious disbursements but not on ones that do not appear to be related to the financial exploitation of seniors. The rule does not apply to transactions in securities, such as a customer’s order to sell their share of stocks. But it could apply to a request by the investor to disburse shares out of their account. FINRA Rule 4512 The SEC also adopted FINRA Rule 4152, which concerns customer account information. Under this amended rule, members must make reasonable efforts to obtain a name and contact information for an investor’s trusted contact person on their account. Investors should have a trusted contact listed whom the stockbroker can reach out to and disclose pertinent information about an account. They can also disclose health status and even ask about the client’s whereabouts if the broker cannot reach them directly. Stockbrokers can get a trusted contact name when opening the account or when updating information for accounts established before the effective date of Rule 4512. The amendment requires the broker to disclose in writing or electronic documentation...

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What Is a Breach of Fiduciary Duty and How Can You Prevent It?

As an investor, you may have heard that your financial advisor has a “fiduciary duty” toward you. You may also have heard that breaching this duty can result in sanctions or other penalties for your financial advisor. The relationship between you and your financial advisor is special because you are relying on them for advice about your finances. As your wealth grows, it becomes more and more important to be able to rely on this advice and trust that your financial advisor is only doing what is best for you. The law recognizes this by imposing special obligations, called fiduciary duties, on financial advisors. What Is a Fiduciary Duty? The relationship between an investor and a financial advisor is a special kind called a “fiduciary relationship.” A fiduciary is a person that acts on behalf of someone else, called the principal, to the benefit of that principle. A fiduciary duty is a legal responsibility a fiduciary owes to the principal. Depending on the context of the fiduciary relationship, this duty may take different forms. In general, however, a fiduciary must Put the client’s best interests above their own; Avoid conflicts of interests or disclose them when they arise; and Act with honesty, good faith, and loyalty toward the principal. Under the Investment Advisers Act of 1940, only registered financial advisors are fiduciaries. Broker-dealers, on the other hand, are regulated by the Financial Industry Regulatory Authority (FINRA). FINRA Rule 2111 holds brokers to the lower standard of “suitability.” The most important difference between the two is that a fiduciary is required to put their principal’s best interests above their own at all times; suitability merely requires a broker-dealer to make investment decisions that are “suitable” based on their client’s investment profile. What Constitutes a Breach of Fiduciary Duty? In its simplest form, a breach of fiduciary duty occurs when a fiduciary acts in their own interest, rather than in the best interest of their client. A financial advisor can breach this duty in a variety of ways. For example, one of an investment advisor’s primary responsibilities is properly managing their client’s investment account. Part of their fiduciary duty is managing that account with the appropriate level of professional skill. Failing to conduct proper due diligence on investment or failing to inform their client of an important fact about an investment constitutes a breach of the advisor’s fiduciary duty. Other common examples of an investment advisor’s breach of their fiduciary duties include Using an investor’s funds for the fiduciary’s own personal gain; Engaging in or failing to disclose a conflict of interest; Taking an investment opportunity for themselves, rather than for the client; Commingling an investor’s money with the fiduciary’s own funds; or Engaging in any transaction without permission from the investor. Investors should always pay careful attention to the conduct of their financial advisors to make sure they are acting in the investor’s best interest. Breach of Fiduciary Duty Damages That Are Available If you suffered investment losses because your financial advisor gave you bad advice, you may be able to recover some of those losses based on your financial advisor’s breach of their fiduciary duty. An advisor’s breach of fiduciary duty generally entitles you to damages up to the amount you lost because of the breach. However, the actual damages calculation is often more complex than that. Experienced investment fraud attorneys familiar with fiduciary duty cases can help you determine how much compensation you can receive.  In some cases, you may be able to seek punitive damages from your financial advisor in addition to regular compensation. Rather than compensate the victim, punitive damages punish the wrongdoer. Accordingly, they are usually reserved only for misconduct that is particularly severe. Punitive damages are not limited by your actual losses, so they may be much higher than compensatory damages. How to Prove a Breach of Fiduciary Duty Compared to fraud or negligence, proving breach of fiduciary duty is fairly simple. To succeed on a claim for breach of fiduciary duty, you must prove:  The existence of a fiduciary duty,  A breach of that duty, and A connection between the breach and your losses.  Additionally, your financial losses must be real; in other words, you won’t get compensation based on money you could have made. Similarly, you won’t receive any compensation for your financial advisor’s misconduct if you didn’t actually lose any money. If you’re unsure whether your financial advisor breached their fiduciary duty toward you, contact an investment fraud attorney right away. Our firm can help you assess your relationship to your financial advisor, measure your damages, and help you maximize your recovery. How to Avoid a Breach of Fiduciary Duty As an investor, it is not your responsibility to avoid breaching fiduciary duties. However, you can always protect yourself and your investments by paying close attention to your financial advisor. A vast majority of financial advisors want to do right by you, but because there are some unscrupulous advisors out there, you should always stay alert. Contact an Investment Fraud Attorney Today At the Law Offices of Robert Wayne Pearce, P.A., we have been helping investors recover from financial advisors and brokerage firms for over 40 years. If you believe your financial advisor breached their fiduciary duty, we can help you too. Contact us today for a free consultation.

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What Is Hedge Fund Fraud?

Hedge funds are an increasingly popular investment tool, often suggested as an alternative to other pooled fund investments. However, because the Securities and Exchange Commission (SEC) provides less regulation over them, hedge funds carry a greater risk. Over the past two decades, investors have lost billions of dollars to fraud involving hedge funds. As an investor, it is important to be aware how hedge funds operate and how they can be fraudulent. If you believe you’ve been the victim of investment fraud, contact an investment fraud attorney right away. They can assess your case and advise you on your potential options for recovery. What Is a Hedge Fund? Simply put, hedge funds are a type of investment partnership. Like a mutual fund, a hedge fund is built from the pooled funds of many different investors. These investors give their money to fund managers, who invest it according to the fund’s overall objectives. Hedge funds are an attractive option to many investors because they are more aggressively managed than other investment vehicles. Hedge funds invest in a variety of non-traditional assets beyond stocks and bonds, including foreign currencies, real estate markets, and even derivatives. This kind of investment strategy does have its benefits. At the same time, however, the enormous complexity of hedge funds makes them a higher risk. Investors may not know exactly how their money is tied up at any given time. What Is Hedge Fund Fraud? There is no single way that hedge fund managers defraud investors. Instead, hedge fund fraud can take the form of several common types of investment scam, including: Embezzlement; Insider trading for the personal benefit of the hedge fund managers; Securing an investment through misrepresentations about about the investments within the fund or its promised returns; Securing your investment without properly disclosing the risks of the fund; and Hiding investment losses. Occasionally, a hedge fund covers up an outright investment scam from the beginning. Bernie Madoff’s infamous Ponzi scheme, for example, involved a hedge fund. Many hedge funds are legitimate, but investors must always be wary of who is managing their money. What Are the Signs of Hedge Fund Fraud? As with other types of investment fraud, hedge fund fraud can take a number of forms. In general, however, if the promises made about a hedge fund seem too good to be true, they probably are. No two hedge fund fraud cases are exactly alike, but there are several red flags you can look for. When researching a potential investment, pay attention to Promises of excessive returns; Promises of consistent returns regardless of market strength; Vague or complicated communication about your investment; Whether an independent accounting firm regularly audits the fund; and Whether the fund has a balance of liquid and illiquid investments. In addition, the conduct of a hedge fund manager is a good way to judge the legitimacy of a hedge fund. Unlike brokers at a brokerage firm, hedge fund managers do not receive commissions for the securities they sell. Instead, reputable hedge funds charge a management fee of between 1% and 4% of the total assets managed and a performance fee based on the total profit the fund generates. If you plan to invest in a hedge fund and the manager indicates that they are paid on commission, it’s probably best to stay away. Why Is Hedge Fund Fraud So Common? Hedge funds have two primary characteristics that make them a prime target for investment fraud. First, compared to other investments, hedge funds are relatively unregulated. And second, hedge funds involve larger investments and wealthier investors. Hedge Funds Operate with Less Oversight from the SEC Hedge fund fraud is more common because hedge funds operate with less oversight from the SEC. The SEC requires certain types of investment companies to register with the Commission before commencing operations. As a condition of registration, these companies must file certain reports with the SEC. This additional oversight makes it harder for these regulated investment funds to engage in fraudulent behavior. Hedge funds organize themselves as private investment limited partnerships so that they fall within an exception to these registration requirements. This exception allows hedge funds to operate without registering with the SEC and exempts them from the same mandatory reporting requirements as registered investment companies. Hedge Funds Involve More Money Compared to Other Funds Hedge funds are a common target for investment fraud because they involve investors with a higher net worth than in other pooled funds. Compared to other types of investments, hedge funds require sizable upfront investments to join. What’s more, the SEC permits only accredited investors to trade in unregistered securities. The SEC considers an investor to be “accredited” if they have an individual income in excess of $200,000 per year or a net worth of more than $1 million. In August 2020, the SEC amended the definition of “accredited investor” to include investors that meet certain minimum thresholds of professional knowledge, experience, or certifications. In a sense, accredited investors are those that the government believes are sophisticated enough to make riskier investment decisions on their own. However, even diligent and knowledgeable investors may fall victim to particularly clever investment fraud schemes. Unscrupulous hedge fund managers know this and may see these wealthy investors as an opportunity for fraud. Should I Hire an Investment Fraud Attorney? If you’ve suffered investment losses after investing in a hedge fund, it is important to speak with an investment fraud attorney right away. As an investor, there are a number of legal theories on which you can rely to hold a hedge fund and its managers liable for your losses. For example, even though hedge funds are not required to register with the SEC, hedge fund managers are still investment advisers obligated to act as fiduciaries to their investors. As fiduciaries, hedge fund managers owe both a duty of loyalty and a duty of care to their investors Thus, in addition to claims for misrepresentation, breach of contract, or other theories of liability, hedge...

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How to Sue Your Stockbroker Over Losses

One of the most common questions we get from clients in the investment loss law firm is can I sue my stockbroker? Can I Sue My Stockbroker? While the answer is technically yes, more often than not investors will have to use arbitration instead of filing a lawsuit. When you opened your brokerage account, you probably signed a new account agreement or something similar. This agreement most likely contained a clause requiring you to decide all disputes between you and your broker through mandatory binding arbitration. Investment Losses? Let’s talk. or, give us a ring at 561-338-0037. Brokerage firms prefer arbitration because while it is similar to the court system, it is often far cheaper and more efficient. As an investor, this option still provides a number of options for you to hold your broker responsible for misconduct. What Can I Sue My Stockbroker For? If you’ve lost money and are wondering how to sue your stockbroker, you’ve probably thought about what you could sue them for. The Financial Industry Regulatory Authority (FINRA) regulates brokers and brokerage firms. Brokers must register with FINRA and follow FINRA’s rules. These rules cover professional conduct and prohibit brokers from taking certain actions. If your broker followed all of the rules and you still lost money, then you probably can’t sue them. However, if you think your broker made a bad investment or managed your money against your instructions, you may have a claim. Some of the most common reasons why a broker is sued include Making unsuitable investments that are not appropriate for your investment profile; Breaching their fiduciary duty; Making material misrepresentations or omissions to their clients; Excessive trading with no reasonable basis for doing so, also called churning; Executing trades without a client’s permission; and  Failing to diversify their clients’ investments. Each investor has different expectations when it comes to their investments. As a result, a “one size fits all” approach is inappropriate for brokers to take. Instead, they must carefully consider their clients’ investment profiles, including each client’s risk tolerance, and act accordingly. Making a bad investment or failing to consider a client’s investment goals may be grounds to sue your stockbroker. How to Sue Your Stockbroker Because brokerage firms require their customers to agree to arbitration, you can likely “sue” your broker only through the FINRA arbitration process. FINRA arbitration is an alternative method of resolving a problem between you and your broker. Rather than going to court in front of a judge, you present your case to a neutral decision-maker called an arbitrator. After reviewing the evidence, the arbitrator may grant you monetary compensation or order other penalties against your broker. FINRA arbitration is similar to going through the court system, but because it is slightly less formal, it is often far cheaper and much more efficient. Nevertheless, the final decision in an arbitration proceeding is binding on the parties. Accordingly, you will not be permitted to make the same claims in regular court. The FINRA Arbitration Process There are six steps in the FINRA arbitration process. Much like in the regular court system, these steps allow the parties to collect evidence, present their case, and receive a decision from the arbitrator. 1. Filing a Claim and Getting an Answer Just like you would in a regular court, the first step in FINRA arbitration is filing a statement of claim and paying the filing fee. This statement sets out what you believe your broker did wrong, facts supporting that claim, and the remedy you want the arbitrator to provide. In many cases, you will want to ask the arbitrator for monetary damages to cover your investment losses. In some cases, however, you may want to force your broker to do something. This remedy is called “specific performance.” After your claim is filed, FINRA will notify your broker of the pending complaint. The broker then has an opportunity to provide an answer. The answer will contain other relevant facts and set out the broker’s defenses. Your broker, known as the respondent in the arbitration, has 45 days to respond to your claim. 2. Selecting the Arbitrator An arbitrator is a neutral third party who will act as a “judge” in your arbitration proceeding. FINRA maintains a listing of qualified arbitrators, and it will randomly select the appropriate number of arbitrators for you to choose from. Both you and your broker can strike a certain number of names off the list. This method ensures that both parties are satisfied with the arbitrators selected. The final number of arbitrators depends on the value of your claim. In investor cases with a claim up to $100,000, only one arbitrator decides the case. For investor claims over $100,000, the parties select a panel of three arbitrators. 3. Attending Pre-hearing Conferences Before any evidence is presented, the parties will meet for the first time at a prehearing conference. At this conference, the parties set the schedule for the case. This is when deadlines for discovery, motions, briefs, and other preliminary matters are discussed. 4. Conducting Discovery Discovery is the process of “discovering” facts and information relevant to your case. Just like in a civil trial, you can request specific information from the other party. However, arbitration discovery is generally much more limited. For example, FINRA usually does not permit witness questioning through depositions. If either party fails to provide documents or information in a discovery order, they may be subject to sanctions. In severe cases, the arbitrator can dismiss a claim, a defense, or the entire case. 5. Attending the Hearing At the hearing, the parties will present testimony and evidence of their case. Under normal circumstances, the hearing will be similar to what you imagine in a court case. Witnesses may be called, and documents may be presented. Parties will have the chance to conduct direct and cross-examination of any witnesses and offer exhibits for the arbitrator to consider. When the parties finish presenting evidence and hearing witness testimony, each side will make...

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