Losing money feels awful. Sometimes, it’s the market’s ups and downs that are to blame. But for some investors, their investment account has been mismanaged by a brokerage firm or financial advisor.

When you entrust your money to a financial professional, they have a duty to perform to a certain standard under the law. If they violate that duty, they may be liable to you. But to recover, you may first have to file an arbitration. Wilkowski Law can help you with that.

Why do I have to arbitrate my claim against my brokerage firm?

Arbitration clauses are everywhere. When you opened your investment account, an arbitration clause was likely in the fine print of that agreement. The Supreme Court has said that these arbitration clauses are valid, legal, and enforceable. And they are now widely used across many different industries (read the terms of your Uber agreement or GrubHub account), including in the investment industry.

The arbitration clause requires you to bring any dispute with your broker in an arbitration forum, and it waived your right to bring it in court. 

The rules that will govern your arbitration depend on the type of investment professional and what your account agreement says. Most of the time, you will have to arbitrate in an arbitration forum under rules from the Financial Industry Regulatory Authority. Sometimes it will require arbitration under American Arbitration Association rules.

Are there any advantages to arbitration?

Yes. The first advantage with an arbitration is that it can be cheaper. There are certain costs to you in arbitration, including the initial filing fee and any potential expert witness. But you will not pay for these unless you recover an award (if Wilkowski Law files your case).

Arbitrations can also resolve quicker than court cases, sometimes taking 12-15 months. Consider that court cases may take years to resolve. This means that your case may be resolved sooner in arbitration as opposed to a case in the court system.

Are there any disadvantages to arbitration?

One disadvantage is that you generally are not able to appeal the award. Once the arbitrators decide your award, it is probably the final say. Only in rare cases are you able to appeal what they have decided. One example would be where the arbitrator had a conflict of interest and failed to disclose it. We can tell you more about that if you contact us for a free assessment.

What will I have to do in the arbitration?

When you file an arbitration, you have certain responsibilities. Wilkowski Law will guide you through these if we take your case.

You likely will have to produce certain records that you have, including tax returns, correspondence with your brokerage firm, account statements, and other relevant financial records. 

You likely will also have to answer questions about your education, your background, and your investing experience.  You have to be willing to participate in your arbitration so that you can optimize your chances of getting a successful result.

How do I know if I have a claim?

You don’t have to figure this out yourself. You can always get a free assessment of whether you have a claim by contacting Wilkowski Law.

But there are also some yellow flags to look out for:

Has your portfolio performed much worse than the market in general?

Did you have conservative investing goals, wanting to keep your portfolio safe, yet it has declined substantially?  

Are you heavily invested in unusual financial products that are difficult to understand, such as non-traded REITs, oil and gas leases, or Business Development Companies? 

If you answered yes, contact Wilkowski Law to receive a free assessment of your potential claim.

How do I know if I can afford an arbitration?

If Wilkowski Law determines that you have a claim, we will represent you at no cost to you. We will only be paid if we are successful in recovering some or all of your losses for you.

What happens if I win?

If you win after the hearing, the brokerage firm has 30 days to pay the amount that you have been awarded. There are harsh consequences if a broker firm fails to pay you the award within 30 days.  For example, the firm’s license and the broker’s license will be suspended if they have not paid your award within 30 days.

The firm or broker can also try to vacate the award, but this is very difficult for them to do. It is most often not successful.

Finally, in some cases, if the brokerage firm is unable to pay the award and closes down its business, it may be difficult to collect your award from the firm. Unfortunately, brokerage firms are not required to carry insurance. And you may be surprised to learn that it does not cost very much for a brokerage firm to open shop. A brokerage firm closing up, however, is a worst case scenario that will depend on the amount of the loss and the capitalization of the brokerage firm.

What are my chances of winning?

It’s impossible to say without seeing your account documents and hearing your story. But based on data from FINRA, the great majority of arbitrations settle before going to the hearing.

Of those that go to the hearing, between 35-45% result in an award for the investor. These statistics can be guideposts to you, but your chances of success will depend on your particular facts and circumstances.

Contact us for a free assessment

If you think you have a legitimate dispute with your broker or advisor, contact us us to discuss your investment account and potential recovery or your losses. A licensed attorney will get back to you. All consultations are free.