“FINRA arbitrations are the venue for when you have dispute with your broker or brokerage firm,” Kraszewski says. “More often than not, you sign an arbitration agreement when you open an account with your brokerage firm. In that, you agree to file disputes relating to relationship in the FINRA forum.”
What that means is that investors who have a dispute with their broker or brokerage firm have waived their right to file a lawsuit. Instead, their complaint will be heard through FINRA. Some people may feel that a lawsuit is desirable, but Kraszewski says there are many benefits to having your complaint heard by FINRA.
“The hearing is held in the location closest to where the investor resides,” Kraszewski says. “For all intents and purposes, it is a well-run system. It is a less formal venue than court. The hearings are generally held in conference rooms or conference centers, around a table and can be done in a couple of days. There is less backlog; investors get their cases heard within 12-18 months, whereas with court, that time can potentially be longer.”
Kraszewski says that the FINRA process is also less intimidating for his clients, as opposed to a courtroom. There is less emphasis on hearings and there are no depositions. Furthermore, FINRA hearings are more private, unlike lawsuits in which the records are open to the public from the beginning.
There are a variety of reasons for filing a complaint against an advisor. Often, complaints are made when investors are given poor advice. But poor advice and market fluctuations are two different things. Bad advice means an investor was given advice that was improper based on his or her financial profile or other characteristics, such as advice to invest more aggressively than the investor could financially withstand.
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Investors may also be embarrassed about having a complaint against their stockbroker or financial advisor. The truth is, however, it happens more frequently than many people think. FINRA complaints are filed on a daily basis.
“In any given year, there are 4,000 or 5,000 claims filed,” Kraszewski says. “Don’t beat yourself up. It happens every single day and will continue to do so indefinitely. The market has been up for almost 4.5 years, there are still investors who received the wrong advice and managed to lose money when the markets have doubled.”