Frequently Asked Questions

Victims of investment fraud and other forms of misconduct often suffer devastating life-changing events. We do not have all the answers. However, based upon our more than thirty years experience representing injured investors in claims against broker-dealers, investment professionals, and financial institutions for misconduct, we have assembled the following most frequently asked questions about investor claims, hiring a securities arbitration lawyer, and what to expect from the FINRA securities arbitration process.

Can I sue my stockbroker?

Yes, you can sue your stockbroker or investment professional if you believe they have acted negligently or fraudulently, breached their fiduciary duties, or recommended the sale of unsuitable or defective investment products.

Stockbroker negligence occurs when a stockbroker fails to exercise reasonable care in handling a client or customer’s securities account, and the failing to follow instructions, making unauthorized trades, or providing inaccurate or incomplete information.

Fraud is not just the misstatement of material or important facts, but also includes the omission of important or material facts such as risk or even the broker’s compensation, or in fact, any information that might assume actual significance in the mind of a reasonable investor in deciding to buy, sell or hold any security.

Fraud also includes Ponzi schemes where the funds are raised from new investors to pay old investors, and selling away schemes where the customer may be induced to invest in a business, promissory note, or some other related scheme.

What is the difference between a stockbroker and an investment advisor?

A stockbroker, registered representative, or associated person, is an individual associated or registered with a securities broker-dealer or brokerage firm that is licensed or registered with the Financial Industry Regulatory Authority or FINRA, as well as the various states, as may be applicable for the purposes of engaging in the purchase and sale of securities.

Stockbrokers and securities broker-dealers, actually execute the transactions in their customer accounts, for which they receive some form of fee based or transaction based compensation. Securities broker-dealers or their securities broker-dealer clearing agents also main custody of customer accounts and securities as required by federal law.

Investment Advisors are not registered with FINRA. Investment Advisors are not bound by FINRA Rules, including the duty to arbitrate before FINRA. Investment Advisors and their firms are not required to maintain Errors and Omissions Liability Insurance.

Investment Advisory agreements often contain exculpatory clauses, and require victims to submit to costly arbitration before AAA or JAMS. Other than common law claims for negligence, breach of fiduciary duty, breach of contract or fraud, the Investment Company Act of 1940 does not provide for a private right of action. Investment Advisors do not execute securities transactions, nor do they maintain custody of customer funds or securities. Investment Advisors merely provide investment advice or services for a fee.

What duties do stockbrokers owe investors?

Stockbrokers owe several duties to their investors, including the duty of loyalty or to refrain from self-dealing, and to put the customers “best interest,” ahead of their own pecuniary interest, the duty to conduct due diligence, or obtain and study the necessary or important facts, to disclose important facts, and not omit important facts, and only make recommendations that are suitable for an individual customer based upon their age, investment objectives, stated risk tolerance, and overall financial condition.

What to do if my stockbroker lies to me?

If you suspect that your stockbroker has lied to you, you should take the following steps:

Gather all relevant documentation: This includes any statements, emails, or other communications you have received from your stockbroker regarding the investment in question.

Contact a securities attorney: If you believe that you have suffered financial losses as a result of your stockbroker’s actions, you should contact a securities attorney who can advise you on the strength of your case and the best course of action.

What is unsuitable investment advice?

Unsuitable investment advice refers to recommendations made by a stockbroker or financial advisor that are not appropriate for the customer’s stated investment objectives, risk tolerance, and overall financial condition. Unsuitable investment advice or unsuitable recommendations can attach to the recommendation to buy, sell or hold, and can also include an unsuitable investment strategy.

For example, an stockbroker or investment professional may recommend high-risk investments to a conservative investor who has stated they only want low-risk investments. Or, an advisor may recommend an investment that is not suitable for the client’s age, income, or net worth. In general, the investment advisor or stockbroker has a legal and regulatory duty to conduct a reasonable investigation of the investment product and to determine whether the investment product is suitable for the particular customer.

If a stockbroker or a financial investment advisor recommends an investment that is not suitable for a client, the investment advisor or stockbroker may be liable for losses suffered by their customers.

If a customer suspects that they have been given unsuitable investment advice, they should consult with an attorney experienced in securities matters to determine their rights and obligations and the best course of action.

Will securities regulators help recover my investment losses?

No. Generally, securities regulators, such as the Financial Industry Regulatory Authority or FINRA, the United States Securities & Exchange Commission or the SEC, as well as state regulators, will not help you recover your investment losses. Securities regulators may impose fines, issue cease and desist orders, order disgorgement or even establish restitution funds in larger cases.

However, absent actual theft, they rarely get involved in individual cases. Securities regulators are only concerned with enforcement of the law or rules, much like a traffic cop that issues a ticket to a driver for running a stop sign, but is not going to repair your car.

Customer complaints to regulators are often disclosed to the offending firms or entities in connection with the solicitation of a response. “Close Out” letters will generally state that upon the investigation of this matter, there has been no finding of the violation of the federal securities laws or self-regulatory rules. (However, lack of prosecution is not evidence, and these letters are not admissible under the rules).

Generally, the customer’s only choice is to hire qualified counsel and determine their rights and responsibilities.

Who is responsible for my stockbroker’s conduct?

A brokerage firm can be held vicariously liable or responsible for the conduct and activities of its stockbrokers or associated persons as “control persons,” with the power and ability to control the conduct and activities, under both state and federal law.

A brokerage firm can be held vicariously liable or responsible for the conduct and activities of its stockbrokers or associated persons as agents, under the common law doctrine of respondeat superior. However, a brokerage firm can be held directly liable or responsible for the conduct and activities of its stockbrokers or associated persons based upon the failure to supervise.

FINRA requires brokerage firms to have policies and procedures in place to supervise their registered representatives and to ensure that they comply with the federal and state securities laws and self-regulatory rules. The duty to supervise includes the reviews of customer trading activity, customer complaints, and other red flags that may indicate misconduct.

What is “selling away”?

“Selling away” refers to the practice of a stockbroker or financial professional recommending or selling securities to clients that are not offered or approved by their securities broker-dealer or brokerage firm. It is also referred to as “private securities transactions,” and means that the stockbroker is selling securities that are not on the firm’s list of approved products and not being monitored by the firm.

Selling away can be difficult for clients to detect, as the broker may not disclose that the securities are not being offered or approved by the firm. If a customer suspects that their stockbroker may have engaged in selling away, they should consult with a securities attorney to discuss their legal rights and obligations.

What are the signs of investment Fraud?

Signs of investment fraud include:

• • High-pressure sales tactics
  • Unsolicited offers
  • Guaranteed returns or little to no risk
  • Complex or secretive investments
  • Requests for cash or wire transfers
  • Requests to not discuss the investment with anyone
  • Requests to send money to a P.O. box or overseas address
  • Promises of high returns with little or no risk
  • Unlicensed or unregistered individuals or firms offering investments
  • Asking for personal information such as your Social Security number

What is FINRA Broker Check?

FINRA BrokerCheck is a public disclosure service provided by the Financial Industry Regulatory Authority (FINRA) that allows investors to research the professional background and qualifications of registered brokers and firms. The service provides information on a broker or firm’s registration and employment history, as well as any disclosures of legal or regulatory actions, customer complaints, or financial disclosures.

The information available on BrokerCheck includes the broker’s current and previous registration and employment history, regulatory actions and customer complaints, and any bankruptcy filings. It also includes arbitration awards and civil judgments, and regulatory sanctions, such as fines or suspension from the industry, and if the individual has been barred from the industry.

This information allows investors to make more informed decisions about who they choose to work with for their financial needs. It is important to note that a clean record does not guarantee that a broker will be free of misconduct in the future.

What are the most common investment fraud schemes?

There are several common investment fraud schemes. The most common investment scheme is the Ponzi scheme. In a Ponzi scheme, the fraudster uses funds from new investors to pay returns to existing investors, creating the illusion of a profitable investment. Pyramid schemes are also popular. In a pyramid scheme, individuals are recruited to invest and then are encouraged to recruit others to invest. Both schemes rely on the constant recruitment of new investors to generate returns for earlier investors.

Cyber-fraud and Cyber-theft: Investment fraud schemes that are advertised and promoted through the internet, such as fake websites and social media pages, have become increasingly popular.

The “Pig-Butchering” scam, a top investor threat, according to state regulators, and generally lures investors wire funds to invest in certain managed crypto-currency accounts, which are monitored on-line or via an app, and which purportedly increase exponentially in value, causing the investor to invest even more. However, after the investor cannot invest more, and is made to pay fake fees and taxed, the platform disappears.

Interestingly enough there is a new scam which prays on the scam victims’ effort to recover their losses through fake, and otherwise non-existent law firms which solicit up front fees to recover crypto-fraud losses for investors.

If a customer suspects that they are the victim of cyber-fraud and or cyber-theft, they should consult with a securities attorney to discuss their legal rights and obligations.

Can lawyers help investment fraud victims?

Yes, lawyers can help investment fraud victims.

Investors should not navigate the legal process or the FINRA securities arbitration process on their own. A lawyer who has experience with securities fraud and investment fraud cases can help victims in several ways:

Investigating the case: A lawyer can investigate the fraud by gathering evidence, reviewing financial records to determine the extent of the fraud and the parties involved.

Identifying possible legal claims: A lawyer can help victims identify any potential legal claims a customer may have against their stockbroker or their investment professional or their firm.

Filing a claim: A lawyer can file a lawsuit in court or a claim in arbitration before FINRA on behalf of the victim to seek damages and compensation for the losses. Only the formal filing of a lawsuit or arbitration claim is sufficient to toll the statute of limitations.

Representation at trial or hearing: A lawyer can represent the victim in court or before FINRA to advocate on their behalf and represent them in the FINRA arbitration process.

Why Do I Need a Securities or Investment Fraud Attorney?

Securities or investment fraud can be a complex and technical area of law, and the services of an experienced attorney can be invaluable in navigating the legal process. Here are a few reasons why you may need a securities or investment fraud attorney:

Proving Fraud: Proving fraud can be difficult and requires a thorough understanding of securities laws and regulations, as well as the ability to analyze financial data and interview witnesses. An attorney can help you gather and present the evidence needed to prove fraud.

Navigating the Legal System: Securities and investment fraud cases can involve multiple government agencies and regulatory bodies, such as the SEC and FINRA. An attorney can help you navigate the legal system and ensure that your case is handled properly.

Protecting Your Rights: An attorney can help you understand your rights as an investor and advocate for your interests in legal proceedings.

Recovering Losses: An attorney can help you pursue legal action to recover your financial losses, including through arbitration and litigation.

Avoiding Limitation Periods: There are limitation periods for filing a claim, an attorney can help you to file a claim in time and avoid missing out on your right to recover your losses.

Overall, an attorney can provide you with legal guidance and representation throughout the process of pursuing a securities or investment fraud case, and can help you achieve the best possible outcome.

How do I find a good investment fraud attorney?

Finding a skilled investment fraud attorney can take some research and effort, but it is important to ensure that you have a qualified and experienced attorney representing you.

Here are some steps you can take to find a qualifed investment fraud attorney:

Check credentials: Research the attorney’s credentials, such as their education, experience, and professional memberships. Look for an attorney who has experience handling investment fraud cases.

Look for specialized practice: Look for an attorney who specializes in investment fraud cases, as opposed to one who handles a wide range of legal matters. This will ensure that the attorney has the necessary knowledge and experience to effectively represent you.

Contact the attorney for a consultation: After you have narrowed down your list of potential attorneys, contact them for a consultation. This will give you an opportunity to ask questions and understand the attorney’s experience, approach, and communication style.

What is contingency-fee legal representation?

Contingency fee legal representation is a type of fee arrangement where a lawyer represents a client in a legal matter and only receives compensation paid if the client prevails or settles their case. In a contingency fee arrangement, the lawyer will agree to take on a case, and the client will not have to pay any legal fees upfront.

Instead, the lawyer will only be paid if the case is successful. The fee is typically a percentage of the settlement or award that the client receives, with the percentage varying depending on the type of case.

This type of fee arrangement is beneficial for clients who may not have the financial resources to pay a lawyer’s hourly rate or retainer upfront.

It is important to note that not all types of legal cases are eligible for contingency fee representation, and not all lawyers offer this type of representation.

What is a fiduciary?

A fiduciary is a person or organization that is legally bound to act in the best interests of another party. This often refers to financial advisors, investment managers, and trustees, who have a legal duty to put the financial interests of their clients or beneficiaries first. They are also required to disclose any potential conflicts of interest and make full disclosure of all relevant information to the parties to whom they owe a fiduciary duty.

What is FINRA arbitration?

FINRA (Financial Industry Regulatory Authority) arbitration is a dispute resolution process that allows investors and brokerage firms to resolve disputes through a neutral third-party arbitrator rather than through the court system. The arbitration process is governed by FINRA rules and typically involves a hearing where both parties present their evidence and testimony.

FINRA arbitration can be used to resolve a wide range of disputes, including disputes related to securities transactions, brokerage account issues, and claims of fraud or misrepresentation. It is typically faster and less expensive than going to court, and the decision of the arbitrator is final and binding, although there is a limited right to appeal.

When customers open a brokerage account, they are generally required to sign an agreement that includes a clause mandating arbitration of disputes before FINRA. This means that if you have a dispute with your stockbroker or securities broker-dealer, you will be required to submit the matter for adjudication in arbitration before FINRA, instead of going to court.

What is a FINRA arbitration lawyer?

A FINRA arbitration lawyer is an attorney who specializes in representing clients in disputes that are brought before the Financial Industry Regulatory Authority (FINRA). FINRA is a self-regulatory organization (SRO) that oversees brokerage firms and registered representatives (stockbrokers) in the securities industry.

When a dispute arises between a brokerage firm, stockbroker, or a customer, FINRA provides an arbitration forum for resolving the dispute. FINRA arbitration is a less formal and a quicker process than going to court, and it is often a requirement in the customer agreement that a dispute must be resolved through arbitration.

A FINRA arbitration lawyer will have experience and knowledge of the FINRA arbitration process and the specific rules and regulations that apply to disputes in the securities industry. They will be able to advise clients on their rights and options, represent them in the arbitration proceedings, and help them navigate the FINRA arbitration process. They will also be able to help clients to achieve a fair and reasonable resolution to their dispute, whether it’s through settlement or an arbitration award.

Who are FINRA arbitrators?

FINRA (Financial Industry Regulatory Authority) arbitrators are individuals who are selected to hear and decide disputes between investors and securities firms or registered representatives. FINRA is a self-regulatory organization (SRO) that oversees brokerage firms and registered representatives in the securities industry. One of its functions is to provide a forum for the resolution of disputes through arbitration.

FINRA arbitrators are typically individuals with a background in the securities industry, such as former securities industry professionals, attorneys, or retired judges. They are trained to hear and decide disputes in accordance with FINRA’s rules and procedures.

FINRA arbitrators are appointed to hear matters on a case-by-case basis. The parties to a dispute select the arbitrators from a pool of potential arbitrators maintained by FINRA. The selection process is designed to ensure that the arbitrators are impartial and have the necessary qualifications to hear and decide the case.

Arbitrators are not employees of FINRA, but rather, they are independent contractors who are compensated for their services. They are responsible for rendering a decision based on the evidence presented, and the decision is final and binding on the parties.

FINRA arbitration is considered as an alternative to court litigation and is often faster, less expensive and less formal than court proceedings. It is important to note that while the decision of FINRA arbitrators is final and binding, there are some limited grounds for appealing the decision.

How long does FINRA securities arbitration take?

The length of a FINRA securities arbitration can vary depending on a number of factors, including the complexity of the case, the number of parties involved, and the availability of the arbitrators. Generally, the process of FINRA securities arbitration is faster than traditional court litigation.

The process of FINRA securities arbitration typically involves the following steps:

Filing a claim: A claim is filed with FINRA by the claimant, this step is usually done with the help of an attorney.

Discovery: The parties exchange documents and gather evidence for their case. This can be difficult process particularly when the opposing party seeks to conceal highly relevant documents based upon frivolous objections and misplaced assertion of non-existent privileges.

Pre-hearing conference: FINRA schedules a pre-hearing conference to discuss procedural issues and to set a hearing date.

Hearing: The hearing is held before a panel of arbitrators, who will hear the evidence and arguments presented by the parties.

Decision: After the hearing, the panel of arbitrators will deliberate and issue a decision. This decision is typically issued within 30 days of the hearing.

FINRA has implemented some measures to expedite the process and reduce the duration of the arbitration process, such as implementing stricter deadlines for the exchange of documents and evidence, the filing of important motions, including discovery motions, if needed, and the scheduling hearings in a more timely manner.

How do I know if I have a valid case?

The success of any case depends upon, or at least should depend upon, the merits of that particular case based upon the individual facts and circumstances surrounding your claim, and the legal theories or legally recognized causes of action with respect to your claim.

If you believe that you have been the victim of fraud, that you were deceived, or your broker did not follow your instructions, sold you investments that were defective, or were overly risky, based upon your overall financial condition and status, or made investment recommendations to you to advance his or her own personal financial interest, as opposed to yours, you may have a valid claim and successfully recover your investment losses through filing a securities arbitration before the Financial Industry Regulatory Authority (FINRA).

If you do not formally bring your claim by filing an action in arbitration or any other forum or court of competent jurisdiction within a specified period of time of the events giving rise or notice of the facts giving rise to these claims, which varies under state and federal law, your claim may be barred or forever lost under the applicable statutes of limitations.

The failure to act, again with the passage of time, may also result in your case being ineligible for submission to arbitration before FINRA. No one, except perhaps the securities arbitration panel that may ultimately decide whether you have a viable or valid claim.

How long does the process take?

The entire securities arbitration process generally takes 12-15 months from the filing of the Statement of Claim to a final hearing. Respondents will have 45 days from the date they receive the Statement of Claim to answer, and may request additional time (which will not affect the process). We will review the Answer and send it to you with our comments. We also seek your comments, as to factual matters or the existence of documents.

Thereafter, we receive a list of proposed FINRA Securities Arbitrators, their educational background and their occupational background. We research them, strike the ones perceived to be unsympathetic, and rank the ones we think may be sympathetic to the facts in our case. Discovery is prepared, and we sent to you a list of documents that are required to be provided to us for review and production to Respondents.

We have a telephonic conference or Initial Pre-Hearing Conference (“IPHC”) with counsel and the arbitrators which results in a scheduling order with respect to motions and final hearing dates. We also send a notice to you setting forth these important dates.

What documents do I need to provide to evaluate my case?

Once we determine that we are permitted in your jurisdiction to undertake your representation, and determine that no actual or potential conflict of interest may exist, we may offer to investigate or evaluate your potential claim.

In order for us to evaluate your case or claims, it is important that you complete our New Client Questionnaire, as accurately and completely as you can, and return it to us with all the documents associated with your account, including, to the extent possible, you new account forms, customer statements, confirmations, correspondence, complaints (of any kind), risk analyses, investor questionnaires, or any other documents you may have or that your feel are important to your case or claim.

You may send us copies of these documents, or you can send your original documents, provided that you send them by a secure and trackable means such as Federal Express, DHL, UPS, or Priority mail from the United States Post Office. As part of the firm’s Green Initiative, potential clients are also encouraged to send us documents, when possible, by electronic means.

What happens if you decide to undertake my representation?

If we decide to undertake your representation, we provide to you a written fee agreement setting forth the scope of our representation, the terms of our compensation, and our respective rights and responsibilities. Except with respect to confidentiality, it is only when this written offer is made and accepted that an attorney client relationship is effected.

We then draft a Statement of Claim, which is a formal document setting forth the facts and the legal basis of your claim, for your review and comment, along with a Uniform Submission Agreement agreeing to be bound by the Code of Arbitration Procedure.

What happens if you decide not to undertake my representation?

If we decide not to undertake your representation, we return any original documents that you may have provided us to you, we destroy copies of any documents you may have provided to us, and we sent to you a written communication, as promptly as possible, indicating that we have declined to accept your representation.

If we decide not to undertake your representation, you need not be discouraged, and should you actively consult with other qualified counsel in connection with investigation or the pursuit of any claim that you may have. In any event, you should not rely upon why we may have decided not to represent you, but if you fail to act, and formally file your claim, as set forth above, your claim may be forever barred or lost.

Generally, under the federal securities laws, all such claims must be brought within two (2) years from the date of discovery or notice of any such claim, or five (5) years from the date of the occurrence of the events giving rise to the claim(s), whichever is shorter.

Each state may be different but generally under State law, all common law claims for common law fraud, breach of fiduciary duty, or other tort claims, must be brought within two (2) years of the date of discovery upon the exercise of reasonable diligence. If you fail to bring your claims within these proscribed times, your claims may be forever lost or time barred.

Should I change brokers, or brokerage firms?

While some brokerage firms (it is a growing trend) request that clients who complain take their accounts elsewhere, it is not necessary that you close or transfer your accounts upon the filing of a Statement of Claim. However, if you have received what you believe to be tainted or wrongful investment advice from your broker or brokerage firm, you are no longer justified, or have any reasonable basis to rely upon the advice that individual or the integrity of that institution, and you may seek to engage an alternative investment firm or professional.

However, client are urged to thoroughly investigate any new potential financial advisor, stockbroker (link: Broker Check), or investment advisor, and be sure that their investment objectives, risk tolerance, and other important information is fully completed on all account forms or other documents before they sign or execute any of these forms.

Should I sell the securities that are the subject of my claim?

We also cannot provide you with any investment advice, and cannot predict if any of the securities you own, or which may be the subject of your arbitration claim, may increase or decrease in value. If you independently determine to hold these securities, and they decline in value, Respondent will argue that they are not responsible, and conversely, if you continue to own these securities and they increase in value, Respondent will argue that your damages have been decreased.

Investment decisions, generally, should be made without regard to the existence or anticipated outcome of any litigation, but in any event, we are unable to provide you with any investment related advice.

Guiliano Law Group

National practice exclusively representing investors in claims against brokerage firms for securities fraud, the sale of unsuitable investments, defective financial products, breach of fiduciary duty, and the failure to supervise. We handle all cases on a contingency fee basis meaning that there is no cost or obligation, unless we are able to make a recovery for you, and there is never any charge for a free consultation. For more information, contact us at (877) SEC-ATTY.

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