FINRA cases are a niche area of law. Not every attorney you come across will have the knowledge or experience to successfully handle one of these cases. Our FINRA Lawyers have been handling securities cases for more than twenty years and are members of the Public Investors Advocate Bar Association (PIABA).
The Financial Industry Regulatory Authority or FINRA is a government authorized organization. It is a non-profit and has the task of overseeing U.S. brokers and others working in this sector. It is self-regulatory with oversight from the Securities and Exchange Commission. FINRA’s job is to promote fair financial markets and protect investors. The organization has authorization under federal law to protect investors and ensure honesty and fair broker dealings. It is not subject to the due process clause.
Types of Cases We Handle
FINRA cases can result in an award of substantial sums if they prove a defendant handled an account incorrectly. Though financial fraud can take many forms, some of the more common schemes that lead to substantial investment losses are as follows:
- Unsuitable investments
- Churning of accounts with excessive commissions
- Excessive or inappropriate margin use
- Unauthorized trading
- Fraudulent statements
- Inappropriate or bad recommendations
- Failure to conduct due diligence
- Conflict of interest
Because of the wide array of potential claims investment professionals face, it is wise for them to have an experienced FINRA lawyer on retainer who understands this area of law and can assist them in defending themselves against bogus claims.
Representation for Investors With Fraudulent Losses
Boyle & Jasari represents both defendants and victims in FINRA cases. From multimillionaire private investors to the everyday retirement saver, we know from experience that no one is immune to investment fraud. We also understand how financially devastating a fraudulent loss can be. Fortunately, there are recovery options. We routinely help individuals recover from losses that result from the following:
Churning: Churning is the practice of unnecessarily buying and selling securities which does not benefit the investor and serves only to increase commissions. The excessive buying and selling of a security increases income for an investment advisor but does not benefit the investor. It violates the investment advisor’s duty to his or her customer.
Margin Account Abuse: Margin accounts are essentially loans made by the broker-dealer to the investor for the purchase of securities. While they work well when the price of a security is going up, a decrease in the security’s value can result in a “margin call” requiring the investor to cover all or part of the loan amount. The use of a margin account can significantly amplify the loss an investor suffers as the result of the downturn in a security’s value. Margin accounts are unsuitable for inexperienced investors, and it is common that investment advisors do not properly explain the risks associated with a margin account.
Overconcentration: A diversified portfolio is one of the best ways to protect an investor since a significant decline in a single stock can severely impact the portfolio’s value. When an investment advisor recommends too large an investment in a particular security, an “Overconcentration” occurs.
Unsuitability: Not every investor has the same investment needs. An investment advisor must take into account an investor’s goals, needs, and risk tolerance level and risk tolerance in recommending appropriate investment. When an investment recommendation fails to take these matters into account, the investment is “unsuitable”.
Unauthorized Trading: An unauthorized trade is a trade made without obtaining the investor’s permission.
Failure to Execute Trades: A failure to execute a trade directed by the investor violates FINRA Rules, the investment agreement and the investment advisor’s duty to his or her customer.
Breach of Fiduciary Duty: Some brokers and investment advisors owe a heightened duty of loyalty to their customers, depending on a couple of different factors. This duty requires the investment advisor to place the interest of the customer above that of the advisor and to act in the best interests of the customer. Failure to do so constitutes a breach of fiduciary duty.
Breach of Contract: The relationship between the customer and the broker and its brokerage firm is governed by one or more contracts, and the failure to adhere to the contract terms is referred to as a “breach” of the contract.
Misrepresentations and Omissions: Often termed “fraud” the failure of a broker to explain all material information associated with a transaction or the misrepresentation of information about an investment, including the risks, is termed “misrepresentations and omissions.
Negligence: Negligence occurs when a broker fails to exercise reasonable care in advising on the purchase of a security.
Selling Away: Selling away occurs when a broker advises a customer to invest in an unauthorized security or investment.
Frequently, this will involve non-conventional investments like promissory notes and real estate. Though unscrupulous investment professionals are often discreet in their transgressions, there are signs you can look for that may indicate you are the victim of investment fraud. Those include guarantees, complex strategies, account discrepancies, missing documentation and an overly pushy salesperson. If you suspect you are the victim of fraud, work with a knowledgeable attorney who can inform you of your rights, help you file a claim and represent you during the arbitration process.
The Arbitration Process Explained
Almost all investors agree to arbitration when opening an account, and you also agree to use FINRA dispute resolution.. This is typically an expedited process with a hearing that lasts a few days at most. Your case is usually eligible for arbitration if it is within six years of the time of the events leading to the claim. This form of alternative dispute resolution involves you, the other party and one to three arbitrators that you and the other party select. You will be able to present your case, give testimony and provide evidence. The arbitrators will make a final, binding decision called an award. The steps in the process include:
- Claimant files a Statement of Claim
- Respondent files an Answer
- Parties select arbitrators
- Arbitrators hold prehearing conferences
- Parties exchange information in discovery
- Parties attend hearings
- Arbitrators render decision
FINRA is not a part of the arbitration process beyond providing a forum and helping to enforce payments of the award. The process must follow all SEC approved rules. It is confidential, and no part is publicly available except the final award.
Throughout the process, you have the right to try to reach a settlement, with which your FINRA Arbitration Lawyer can assist. About 69% of cases result in settlements, and only 18% go through the whole process. The remaining cases end due to withdrawing the case, bankruptcy or court stay actions.
Financial Investment Professionals May Have Deceiving Titles
For most of the United States, financial education is minimal. Schools may have a class project involving the stock exchange, but students only gain the generalized knowledge that it fluctuates. Most Americans who wish to begin investing decide to educate themselves enough to have a simple understanding of stocks, bonds, and a 401K. However, the fluctuations in the stock exchange are due to a number of variables, leading many novice investors to employ experts for guidance. Investment professionals are motivated to appear well-educated and successful. They choose titles that will imply a sophisticated knowledge of financial investment matters, but may not possess a professional license or certification to justify their position. FINRA has issued a warning to investors and identified some common titles used by individuals who indicate they are experts but have no specialized knowledge, certificates, licenses, education, or training.
- Financial Advisors
- Financial Analyst
- Financial Consultant
- Financial Planner
- Investment Consultant
- Wealth Manager