The investors trust the brokerage companies, financial advisors and investment managers to take good care of their funds. Nevertheless, investment decisions and practices are not always ethical and legal, which may result in losses because of misconduct, misrepresentation, or fraud. Learning about Securities Fraud and FINRA Arbitration is imperative to investors who have suffered at the hands of a broker or a firm and are looking to sue them. The FINRA arbitration provides a special venue in which arbitration customs are conducted effectively and efficiently to solve disputes relating to securities fraud.
Securities fraud is a case in which an investor makes losses through deliberate misrepresentation, nondisclosure, or misrepresentation when buying or selling investment products. Typical forms of securities fraud are:
- False or misleading investment returns or risks: This is where brokers misrepresent investments by giving false or misleading information.
- Insider trading: The use of unpublished and material information to benefit self-interests.
- Ponzi schemes: Investment schemes that involve investment activities that are fraudulent and pay the pre-existing investors using the money raised by newer investors.
- Inappropriate advice: Giving advice to invest in products that are not relevant to their risk tolerance and financial objectives.
Securities fraud victims usually encounter difficulties in their litigation to recoup losses in a traditional litigation process which may be expensive and time consuming. Here FINRA arbitration can be a possible alternative.
The FINRA Arbitration Role
Financial Industry Regulatory Authority (FINRA) is a self regulatory organization that regulates the activities of the brokerage firms and the registered representatives. FINRA offers arbitration as an alternative dispute resolution process required or optional to address disputes involving investors and broker-dealers.
The FINRA based arbitration is intended to be quicker, less formal and cheaper than court-based litigation. This will enable investors who have suffered through fraudulent activities to bring their claims before an independent panel of arbitrators, who are professionals in securities laws and the practice of investments. These boards can order compensatory damages on financial losses, interests and in certain instances, legal costs.
How Investors File a Claim
It starts by submitting a Statement of Claim to FINRA. The assertion has to specify the type of securities fraud, the participants and damages. The claim should be in writing and supported by evidence, and therefore investors usually have the services of a legal counsel to ensure that the claim is well documented.
A properly prepared case increases the likelihood of an award in favor of arbitration. This is especially where legal representation will be handy in dealing with more complex financial matters, challenging the opposing witnesses, as well as in making sure that the rights of the investor are effectively stipulated throughout the hearing.
The Arbitration Hearing
The FINRA arbitration hearing gives the investor and the brokerage firm an opportunity to testify, invite witnesses and argue legal issues. Contrary to court trials, hearings are normally less complex, and presided over by arbitrators instead of judges or jury. Arbitrators also examine the financial reports, expert opinions and the testimony of the witnesses to establish whether there was any fraud or misconduct and the compensation.
Mediation decisions that have been awarded by FINRA are usually final, that is the case that cannot be challenged in a court, should the court that has lost accept to pay. But there are few reasons to appeal an award, including the demonstration that arbitrators have engaged in misconduct or have made procedural mistakes.
Managing conflicts that arise in investment fraud may be arduous and hectic to the individual investor. It is important to learn about Securities Fraud and FINRA Arbitration in order to secure one financial interest. Through appropriate paper work, legal advice and arbitration policy it becomes possible to claim the loss incurred by the investors without having to incur the loss time and expense of court proceedings. The arbitration provided by FINRA is a progressive and professional method of settling investment disputes, and the victims of investment fraud have a sure channel of seeking justice.
