The Individual Investors Losses through a FINRA Arbitration

As an individual investor, you place a significant amount of trust in your broker. You trust your broker to make sound investment recommendations, and you trust him or her to manage your portfolio with your best interests in mind. You expect your wealth to build over time, and you expect it to be there when you need it.

But, what if it isn’t?

Common Forms of Investment Broker Fraud

While the securities markets fluctuate, there are certain issues that should not lead to losses for individual investors. These issues involve misconduct by their brokers, and are broadly characterized as investment fraud. While most people think of high-profile scams like those involving Bernie Madoff and Martha Stewart when they hear the term, “investment fraud,” the unfortunate reality is that countless individual investors lose money to broker fraud every single day.

Some of the most common forms of investment broker fraud include:

• Account Churning – Brokers should earn their keep by making profitable investment recommendations, not by trading excessively in order to generate commissions. This is a fraudulent practice known as “churning.”

• Misrepresentations and Omissions – Brokers must provide their clients with the information needed to make informed investment decisions.

• Overconcentration – Brokers should not create unreasonable risk for their clients by pouring their savings into non-diversified investments.

• Unauthorized Trades – Brokers should not make trades without a client’s authorization unless the client has explicitly granted his or her broker the discretion to do so.

• Unsuitable Investments – Brokers should make investment recommendations and trades based on each client’s unique risk tolerance and financial circumstances.

What to Do if You Suspect Investment Fraud

If you have suffered investment losses and believe that your broker may not have been looking out for your best interests, you may be able to recover your losses through the process known as FINRA arbitration. Filing for arbitration does not guarantee that your portfolio will be restored, but it does provide a forum in which to pursue recovery without the burdens of taking your broker to court. Most brokers in the United States are required to register with FINRA, and FINRA-registered brokers are generally required to submit to arbitration.

While FINRA arbitration keeps your investment fraud claim out of court, the process is still complicated, and pursuing a successful arbitration claim requires a thorough understanding of federal securities laws and FINRA’s regulations. As a result, it is strongly in all individual investors’ best interests to consult with an experienced attorney. If you have a claim, an experienced FINRA arbitration lawyer should be willing to take your case on a contingency-fee basis, meaning that you will only pay legal fees if you secure a financial recovery.