Investment arbitration is the arbitration of claims against stockbrokers and investment professionals for fraud, breach of fiduciary, the sale of unsuitable or otherwise overly risky investments, the sale of defective financial products, churning or excessive activity, the sale of unregistered securities and the failure to supervise.
Investment disputes are subject to arbitration before the Financial Industry Regulatory Authority or FINRA. All registered securities broker-dealers and their associated persons or stockbrokers in the United States are required to arbitrate all claims brought against them as a condition of their registration. Almost universally, every brokerage firm in the United States also requires its customers, as a condition of opening a securities or investment account, also requires that the public customer also agree to arbitration before the Financial Industry Regulatory Authority.
However, many investment advisors and investment advisory firms that are not members of FINRA and are not registered as securities broker-dealers may have investment advisory agreements that contain pre-dispute arbitration clauses that require arbitration before the American Arbitration Association, and not before FINRA, and unlike FINRA arbitration also may contain a forum selection clause that may require the disposition or arbitration of any investment dispute at some far away location where the investment firm may be located.
Arbitration before the American Arbitration Association can also be very expensive requiring considerable up front filing fees and the requirement to pay the investment arbitrators an hourly fee to read or review the parties investment arbitration submissions, hear and determine discovery issues and also to hear the investment arbitration claim at a final hearing.
Investment arbitration is, however, litigation. The party bringing the claim for stockbroker fraud or misconduct is required to file a statement of claim setting forth the relevant facts and the legal basis for relief. The defending party will file a formal answer or response setting forth their version of the facts and advance certain legal issues as to why they are not responsible for the customer's investment losses.
The parties will enage in discovery, and notwithstanding that discovery in investment arbitration is supposed to be an efficient and streamlined process, the offending brokerage firm or stockbroker will often refuse or otherwise object to the production of important documents that do not support their theory of the case, and at the same time demand documents from the customer to show they are sophisticated, educated investors with significant prior investment experience, who could otherwise afford to lose their investment, which we call the "you should have known better than to trust us," or the "you could afford to lose the money anyway" defenses.
Stockbrokers and investment professionals hire experienced and qualified counsel to defend investment arbitration claims brought againsg them. Wronged investors should also hire experienced and competent counsel to recover their investment losses in arbitration.
If you have been the victim of securities fraud and wish to bring an investment arbitration against your broker, contact us today for a free confidential evaluation of your claim at (877) SEC-ATTY.