Investors who lose money often wonder whether they can take legal action against their stockbroker or brokerage firm. The answer depends on what caused the loss. Haselkorn & Thibaut, P.A., operating as Investment Fraud Lawyers, helps investors determine whether broker misconduct played a role.
If you suspect a problem, call 1-888-885-7162 for a free case review.
When can you sue a stockbroker?
You can sue a stockbroker or investment firm when losses result from misconduct, negligence, or a breach of duty. A simple market decline is not enough. You must generally show that the broker or firm did something wrong. Common examples include recommending unsuitable investments, excessive trading, misrepresentation, and failure to supervise.
Financial Industry Regulatory Authority (FINRA) Rule 2111 sets the suitability standard that brokers must follow when recommending investments. Many claims are handled through FINRA arbitration rather than court. Brokerage agreements usually require this forum. The process is private and often faster than litigation, but it still requires solid evidence.
Common claims investors bring
The specific claim depends on the facts. Some cases involve one form of misconduct. Others involve several overlapping problems. The table below outlines common claims and what an investor generally needs to show.
| Claim type | What an investor generally must show | Typical evidence |
|---|---|---|
| Unsuitable investments | The recommendation did not fit the investor’s age, risk tolerance, goals, or financial condition. | Account profile, trade records, and correspondence. |
| Churning and excessive trading | The broker traded mainly to generate commissions, not to benefit the investor. | Turnover ratio, commission history, and account statements. |
| Misrepresentation or omission | The broker misstated or hid material facts about an investment. | Marketing materials, emails, call notes, and disclosures. |
| Unauthorized trading | The broker made trades without the investor’s permission. | Trade confirmations, account statements, and written objections. |
| Breach of fiduciary duty | The advisor placed personal or firm interests ahead of the investor’s interests. | Fee structures, conflicts of interest, and timing of trades. |
Warning signs that may indicate misconduct
Not every loss is caused by wrongdoing. The following warning signs suggest that the losses may warrant closer review. Compare each sign with ordinary market risk to see the difference.
| Possible warning sign | Normal market risk | Why the distinction matters |
|---|---|---|
| Your broker ignored your stated risk tolerance. | A broad market downturn affects most holdings. | Misconduct claims focus on the broker’s actions, not the market. |
| You see trades you did not authorize or discuss. | Your positions decline along with their sectors. | Unauthorized trades may support a separate claim. |
| Your account shows unusually high commissions or fees. | Low-fee index funds decline during a correction. | Excessive costs can indicate churning or self-dealing. |
| Your portfolio is concentrated in one product or sector. | A diversified portfolio loses value gradually. | Overconcentration can violate diversification duties. |
| The broker promised guaranteed or safe returns. | All investments carry some risk. | Guarantee claims often involve misrepresentation. |
How the FINRA arbitration process works
Most brokerage customer agreements include a clause requiring disputes to be resolved through FINRA arbitration. This means you usually cannot file a traditional lawsuit in court. Instead, you file a statement of claim with the Financial Industry Regulatory Authority. You can read more about how FINRA arbitration works on its official site.
A panel of arbitrators hears the evidence and issues a binding decision. The process has filing deadlines, document production, and hearings. Investors may recover compensatory damages, interest, and sometimes attorneys’ fees. The exact outcome depends on the facts of each case.
Evidence that can support your claim
Strong claims usually rest on documents. Gather your account statements, trade confirmations, emails, text messages, and marketing materials. Keep notes about phone calls, including dates and what the broker said. These records help show what was recommended and why it was unsuitable.
You should also preserve your new-account paperwork. This paperwork often describes your investment objectives, risk tolerance, and financial situation. Discrepancies between that profile and the investments actually purchased can be powerful evidence.
What recovery may look like
If a claim succeeds, recovery may include the amount of the investment losses caused by the misconduct. It may also include interest and, in some cases, attorneys’ fees and costs. The exact measure of damages varies by claim type and forum.
We work on a contingency fee basis. You owe no attorney fee unless money is recovered.
Why investors choose our firm
Our firm includes former Wall Street defense attorneys with more than 95 years of combined experience. We have recovered more than $520 million for investors and maintain a 98% success rate. Membership in the Top 2% Super Lawyers reflects peer recognition. These credentials do not guarantee any specific result in your case.
Frequently asked questions
Can I sue my stockbroker just because I lost money?
No. Market losses alone do not create a valid claim. You generally need evidence that the broker or firm violated a duty, misled you, or acted negligently.
Do I have to go to court to sue a stockbroker?
Usually not. Most brokerage agreements require FINRA arbitration. The process is different from court, but it can result in a binding award for the investor.
What is the deadline to bring a claim?
Deadlines depend on the claim type and forum. FINRA arbitration has its own eligibility rules, and state laws may also apply. You should speak with an attorney promptly to protect your rights.
Can I recover my attorneys’ fees if I win?
Fee recovery depends on the forum and the claim. In some FINRA cases, arbitrators may award attorneys’ fees. Our firm handles these cases on a contingency basis, so no attorney fee is owed unless money is recovered.
What should I bring to an initial consultation?
Bring recent account statements, trade confirmations, new-account forms, and any correspondence with the broker. These documents help us evaluate whether misconduct occurred.
How long does a stockbroker claim take?
Many FINRA arbitration cases resolve within 12 to 18 months, but complex cases may take longer. Settlement can occur at any stage depending on the evidence.
Call us at 1-888-885-7162 for a free case review. We represent investors nationwide.
This page is for informational purposes only and does not constitute legal advice. Past results do not guarantee future outcomes.