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Stock Broker Fraud and other Investment Losses FAQ

What is stock broker arbitration?

Stock broker arbitration is a private way for investors to settle their disputes with their stock broker or financial firm without having to go through the court system. Investors who believe they are the victims of stock broker fraud must file a stock fraud arbitration to recover their money.

How is stock broker arbitration different from a lawsuit?

Stock broker arbitration is a quicker process than a lawsuit and is heard by an arbitrator or an arbitration panel. The arbitration decision is final and binding, which means that in most cases the losing side cannot appeal the decision. There are different rules of discovery for arbitration than with court proceedings. If the arbitration finds against the broker or financial firm, the losing side has 30 days to pay the claimant.

Can I go to court instead of filing stock fraud arbitration?

Most, if not all, financial firms require investors to sign an agreement that in the case of a dispute, resolution will be sought through the stock broker arbitration process. It is usually only in cases involving a class action claim that a lawsuit is filed. In individual cases, however, you are most likely required to file an arbitration.

In what situations can a stock broker arbitration be filed?

There are a variety of situations in which investors can file an arbitration: stock broker fraud; churning (excessive trading on an account for the purpose of increasing the broker's commissions); failure to diversify; suitability violations (exposing the client to a level of risk that he cannot tolerate); negligence; breach of fiduciary duty; failure to supervise; and breach of contract.

Do I need a lawyer to help me with my stock broker arbitration?

The arbitration process can be long and complex, involving various deadlines and discoveries (where each side learns the other side's case). A lawyer can help to ensure that you are properly represented at the arbitration.

How does stock broker arbitration work?

The investor (known as the "claimant") first files a Statement of Claim. The broker or financial firm (known as the "respondent") files an Answer to the claim, which either admits or denies the allegations made in the statement of claim. Following that is the discovery in which each side receives information from the other. These can include the broker's disciplinary record, supervisory activity regarding the broker and other vital information. The case is heard at the final hearing, which lasts approximately three to five days. After this, the arbitrator or arbitration panel makes a binding decision.

How long does the stock broker arbitration process take?

Typically, a stock broker arbitration case takes between nine and 15 months to resolve. According to FINRA statistics, in 2009, arbitration cases took an average of 11.5 months from the start of a case to the case's closing, including situations in which the arbitration was settled. Cases that went to a final hearing took an average of 14 months to close.

Who oversees the stock broker arbitration process?

The Financial Industry Regulatory Authority (FINRA) oversees the stock broker arbitration process.

Can my case be settled before the final hearing?

Yes. Your case can be settled at any time during the arbitration process.
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Last updated on Dec-22-10

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