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Do you have a problem with your broker or broker dealer? Do you think that there is a problem with your account?


There are good ethical lawyers out there and ethical brokers who will honor their duty to you. But just as there are some bad brokers out there, there are also unethical lawyers. Some plaintiff securities lawyers will take your case knowing full well that they are the only ones who will ever see any portion of your money.


Most securities cases end in settlement and settlements donít often give you 100% of your damages. Between the amount of settlement and the fact that, in most cases, your lawyer will take 30% -- you may walk home with pennies, if anything at all. There are avenues that investors can take on their own. The Self Regulating Organizations (SROs) that monitor and regulate broker dealers offer a vast array of investor options as do the states themselves.

Know the process. There are things you can do on your own!

If you havenít yet opened a brokerage account - Check out your potential broker!
If you already have a brokerage account - Check out your broker!
If you have a brokerage account and a problem with it - Check out your broker's history!


Before you choose a broker, be it someone youíve just become acquainted with or someone youíve known for 10 years, ALWAYS, ALWAYS do your own broker check before you invest your first dollar! This is not difficult to do and these few minutes may save you a lot more than money in the long run. FINRA (Financial Industry Regulatory Authority) formerly the National Association of Securities Dealers (NASD) makes it an easy process for you. FINRA is the regulatory authority for all security firms doing business in the United States. The FINRA (NASD) website provides an avenue to check both your broker and the firm.

FINRA (NASD) Broker Check Program -- Every stock broker is registered with FINRA.

Keep in mind, you may have the best broker around and still lose money in your account.  There is never any guarantee that your investments will always make money. Also, just because your investments have decreased in value or you have lost money doesnít necessarily mean that your broker or the firm has engaged in any misconduct.


If you think that there is a problem in your account;

If you see your statement and it just doesnít seem right--

Immediately call and question your broker over any transaction you do not recall or do not understand.

In most cases, your broker will explain the situation to you and you will realize that the account is as it should be based on the market or your investments.

If his statements to you are not plausible;

If your broker is telling you a story that is just too good to be true;

If your broker tells you something that you would never believe if a stranger was telling the same story;

If your broker ever tells you to do any transaction outside of the sight of your brokerage firm;

If youíre simply not satisfied with the answer your broker gives you--

Immediately ask to speak to the branch manager or the Compliance Department of the brokerage firm.

If you see unauthorized trades in your account--


Brokerage firms are heavily regulated and theyíre in no great hurry to answer to the organizations that regulate them. If youíre not satisfied with the firm's response, send your complaint to the FINRA (NASD) complaint center or your States Securities Division. The North American Securities Administration Association (NAASA) can provide you with the appropriate address for your state. Writing a letter to either of these entities will not cost you any fees and the firm will be forced to respond. Let this process be your first step; you may just find that your problem will be resolved entirely.

If this first step doesnít rectify your problem, you may need to take a more formal route and file a Statement of Claim with the NASD, taking your broker and his/her firm to arbitration. (Most brokerage firms, when opening your account, have included a clause that forces you to take any complaints to arbitration rather than litigating the matter in your state court). Regardless of whether or not you retain counsel, below you will find a general outline of what to expect in this process.

What is an arbitration?

Arbitration is a dispute resolution process where the disputing parties each present their case to either one arbitrator or a panel of arbitrators who examine all the evidence and then make a decision. Generally, arbitration is not as formal as litigation. Arbitration is final and binding, subject to review by a court only on a very limited basis. Keep in mind that if your broker or brokerage firm goes out of business or declares bankruptcy, you may not recover any of your money even if the arbitrator or a court rules in your favor. That is why it is so important to CHECK OUT YOUR BROKER / BROKERAGE FIRM before you ever invest. Also keep in mind a dispute where six or more years have elapsed from the date of the event giving rise to that dispute is, in most cases, past the statute of limitations. It is essential that you review your statements monthly and not wait too long.

How Do You Arbitrate?

Arbitrations are commenced by filing a Statement of Claim, a Submission Agreement and the payment of required fees.

What is a Statement of Claim?

A Statement of Claim is a pleading where you (the plaintiff) alleges the facts that support the relief or remedy you are seeking. It is the document which commences an action or "law suit". This is filed with the Director of Arbitration. Once you file a Statement of Claim, you will be referred to as the "Claimant". The person or firm you've served the claim on is referred to as the "Respondent". Your document should set forth the details of the dispute, including all relevant dates and names, in a clear and chronological order. You should conclude by stating what money damages you are seeking or any other remedy you may want. You should attach copies of any documents you have that support your claim as exhibits to the Statement of Claim. Your Statement of Claim does not have to be in any particular form, it can be simply be a narrative of the events in dispute. Make sure you specifically name anyone you feel is responsible for the actions which harmed you.

You must also submit what is called a Uniform Submission Agreement. This provides a written agreement by the parties to the arbitration to submit the dispute to the arbitrators. The state where the claimant resides is typically honored. However, the actual decision as to place of hearing is ultimately made by the SRO.

What happens after the Statement of Claim is filed?

Once the Statement of Claim has been received, the Director of Arbitration will send it to the respondent. Remember, any broker/ dealer, or employee of a broker/dealer, may be a party in an arbitration proceeding. After the initial Statement of Claim is served by the Director of Arbitration, it is each party's responsibility to provide every other party and the arbitrators directly with any further pleadings, motions, or correspondence. Service of the filings should be made on the same date and by the same means -- be it by overnight mail or fax.

Following the receipt of the claim, the respondent responding to a Statement of Claim, has 45 calendar days to serve and file answers to claims. The answer must specify all defenses available to each claim which is why you should concisely describe each and every claim in your initial claim.

The respondent may assert a related counterclaim as part of its answer, or it may file a claim against a third party; that is, a claim against another person who may bear responsibility for any of the alleged damages. For example, if you file a claim and only name the brokerage firm but the broker who actually is responsible is no longer at the firm and you failed to name him or her, the brokerage firm may file a third party claim to bring that broker into the process. Generally, a claim is considered to be related if it pertains to the customer's account at the broker/dealer.

The Director of Arbitration will appoint, as appropriate, an arbitrator or panel of arbitrators. The Director of Arbitration will notify the parties of the names, current affiliations, and 10 years worth of business history on the proposed arbitrators. In addition, under the Uniform Code and the Code of Ethics for Arbitrators, the parties will be informed of any disclosed information.

After the initial claim is filed and all the parties have been served, the Discovery process will begin.

What is Discovery?

In court proceedings, all parties are entitled to "Discovery". Discovery is an exchange of documents by each party to the other prior to the actual hearing. Discovery is very important as it provides each side with an opportunity to obtain documents from the other side that will help support the claim Ė or maybe the response. It is also especially important for the Claimant because they typically require documents from the brokerage firm/respondent in order to prove their claim. These documents include items such as the firm's financial records, order tickets, commission runs, those portions of the firmís internal compliance manuals that may pertain to the specific complaint, as well as a number of other documents. These are often crucial to a customer's case. Today, any party to an arbitration can request a pre-hearing Discovery hearing with an arbitrator, prior to the start of the hearings, to resolve disputes concerning which documents will and will not be required. Keep in mind, in Discovery, the broker/dealer or broker will also be entitled to obtain all of the financial information he can about the claimant. If you have a brokerage account with another firm and have suffered the same losses, the brokerage firm may utilize this information in their defense especially if you are alleging unauthorized trading.

What to expect at the actual hearing:

Securities arbitrations are conducted in a similar manner as that of a court trial.

1. There are opening statements.
2. There is an introduction of evidence by the claimant.
3. There is an introduction of evidence by the respondents.
4. There is an opportunity for a rebuttal case to be presented.
5. There are closing arguments.

Evidence is typically introduced through the testimony of witnesses. You will testify about your relationship with the broker and then call any other witnesses who support your case. There also may be an avenue to introduce evidence, including correspondence or other account documents.

After each witness for the Claimant testifies on direct examination, the witness is then cross-examined by the Respondentís attorney. Keep in mind, Respondents will always have their own attorney -- either in-house counsel who works for the brokerage firm or they will have hired an outside attorney. If there is more than one respondent, there may be multiple attorneys.

Cross-examination of witnesses in arbitrations is more lenient than in court proceedings. Remember, this proceeding is not as formal as a court would be.

Arbitration hearings are typically scheduled for three consecutive days (longer depending on the complexity of the case).
Once all the testimony is complete and all the evidence has been submitted, the case will be decided by the arbitrators. Donít expect a decision that day. The decision is typically not made at the end of the hearing. You will be notified in writing.

How are parties notified of the decision?

Usually the awards will be rendered within 30 days of the last hearing date. When the decision is made, the arbitrators will sign an award and send copies to the parties. The award will be in writing and signed by a majority of the arbitrators. The award may then be entered by the prevailing party as a judgment in any court of competent jurisdiction. The award does not have to be in any particular format nor do the arbitrators have to provide a reason for their decision or even how they arrived at the damage amount. A party may however request an opinion. This request should be made at the hearing.

After the Award is served on all parties, and depending on the state's rules regarding arbitration, there is a possibility of filing an appeal to the state or federal court of an arbitration award. However, grounds for an appeal are extremely limited, and rarely successful. The awards will be made publicly available.


Once your claim is filed, you may not necessarily go to a Hearing. Mediation is a process very much utilized in the securities industry. Mediation is an informal process where a trained impartial person helps the parties to reach a resolution acceptable to both parties. Keep in mind that the broker/dealer is most likely paying large hourly fees to their attorneys. Depending on the facts of the case (how strong your case / how egregious the brokerís behavior), it may be cost effective for the broker/dealer to come to an agreement with you rather than pay the costs associated with defending the matter. NASD mediators are not employees of NASD Dispute Resolution. Itís important to choose a mediator who has extensive knowledge of securities law and industry practices. All the parties must agree to the mediator assigned. During the process, the mediator will give you an impartial opinion as to the strength of your case and of the brokers. You will be able to gauge what you may reasonably expect to recoup.

Mediations will not likely provide you with a full compensation of your losses but the process may significantly reduce the cost of litigating and is usually much less contentious. Even if the mediation is not successful and you do ultimately proceed to the hearing, the mediation is an invaluable tool for you to learn just how strong the broker/dealerís case is.

To request mediation, contact FINRA (NASD) by using this link to obtain a mediation request form.

For more information regarding the FINRA (NASD) Mediation process see FINRA (NASD) Mediation case Flow.



This site does not offer nor is it legal advice. This site provides educational and helpful references and is designed for those two purposes only. Should you have any specific questions or concerns, contact a lawyer in your area.

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