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New Rules Proposed for Stockbroker Arbitration Cases

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York, NYFinancial Industry Regulatory Authority (FINRA) has proposed rules that would limit the ability of brokerages and firms to file motions to dismiss cases. The new rules would help investors by imposing sanctions on brokerage houses that abuse the arbitration process. Many investors have already used [stockbroker arbitration] to recover money they lost to unscrupulous advisors and the new rules may encourage more to use the arbitration process.

StockbrokerThe new regulations would allow arbitration panels to dismiss claims in three circumstances: if the parties reach a written settlement, if there is no factual way the firm could have been guilty of improper conduct, or if claims are over six years old. Panels would have to unanimously agree to the dismissal. Furthermore, firms that file frivolous motions to dismiss would be required to pay all forum fees incurred because of the motion to dismiss, including costs and attorneys' fees to the party opposite the motion.

According to FINRA, the number of motions to dismiss has dramatically increased, from only 7 percent in 2004 up to 28 percent by the middle of 2006.

FINRA now oversees stock and securities investor protection. It was created in July 2007 from a merger between the National Association of Securities Dealers (NASD) and the member regulation functions of the New York Stock Exchange. FINRA is now in charge of the arbitration process as well as performing a number of other functions.

Some lawyers are now recommending their clients go through mediation when dealing with a securities claim. The main benefits of mediation are that it can take less time to settle a dispute and that a claimant can leave at any time if he or she does not like the outcome. Furthermore, mediation can occur without disrupting the arbitration process, meaning that a dispute can go into mediation and if the two sides do not reach an agreement they can still go through securities arbitration.

Recently, FINRA announced a large fine levied against Morgan Stanley, who was accused of withholding emails in arbitration cases by claiming the emails were lost in the September 11 attacks. The securities firm will pay $12.5 million to settle the allegations, including $9.5 million to claimants affected by the company's actions. Accepting their share of this settlement money does not prevent claimants from following up with their original claims in other venues, including court.

Arbitration can be an effective way of filing a claim against a stockbroker who is believed to have acted improperly. Forms of stockbroker misconduct include churning, recommending unsuitable investments, price manipulation, over-concentration, misappropriation and negligence.

If you have been the victim of an unethical stockbroker, arbitration may be the best route for you to recover your losses. A lawyer can help you determine whether or not you have a case against your stockbroker and whether arbitration or a lawsuit is the best option for you.


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If you have suffered stock losses as a result of stock broker negligence, please contact a lawyer involved in a possible [Stockbrokers and Financial Advisers Lawsuit] who will review your case at no cost or obligation.


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