If you or your client experienced a substantial investment loss, you know firsthand that in addition to the initial shock and anger, there can also be a range of emotions. The Investment Loss Recovery Group has worked through these issues with many different clients over several years. While the facts and details are always unique to each case and client, the emotional aspects are not unfamiliar to us, and we also know just what we need to do to address the situation.
In many instances the losses may first appear to be in the ordinary course of business, or may appear to be merely the result of the market or some other unrelated external event. However, in our experience, once you start investigating and scratch below the surface, there is often much more to the story. A typical investor may find that despite their initial perception of the situation, their losses were the result of fraud and/or negligence by the individual broker or advisor as well as the firm that employed that individual. Sometimes these are intentional acts, and other times the wrongdoing is the result of reckless behavior or sheer negligence.
While a number of options may be available that include individual or class actions in state or federal court, there are many times where the investor’s most effective and most efficient means of recovering investment losses is to consider addressing any claims through a Financial Industry Regulatory Authority (FINRA) arbitration. All broker dealer firms and stockbrokers are registered with FINRA, a self-regulatory organization (SRO) that is vested with the enforcement of rules and regulations governing the brokerage industry.
For most customers, their original account agreement includes an agreement to submit any potential claim or dispute relating to their account(s) to a FINRA arbitration. In other cases, even if the customer does not have a signed arbitration agreement, a customer (in some cases) can mandate that the firm or the advisor by virtue of their FINRA membership agree to submit to FINRA arbitration.
Most FINRA arbitrations are private, confidential, expedited proceedings that do not involve depositions or much in the way of preliminary motion practice. They are typically resolved within 12-14 months, with a large percentage of cases getting settled directly or through a separate non-binding mediation (settlement conference).
Investors place a significant amount of trust in their broker or advisor and the firm they were conducting business with trusting that the investment recommendations and strategies were legitimate and well thought out by professionals and experts in advance. Investors also trust that all professional advice and recommendations were properly supervised and monitored by the firm. In short, investors typically trust that all laws, rules, policies, procedures and regulations are being followed at all times. Investors also tend to recognize that individual investments as well as account values may fluctuate in value to some degree, but the real question is typically whether or not there was any misconduct by the broker, advisor, or the firm in the handling of the investments at issue.
In some cases the losses can be the result of a direct or outright fraud, an indirect theft, or a Ponzi scheme. Some cases involve non-existent or misrepresented investments or investment strategies. However, in many cases what appears to the trusting client to be part of a legitimate investment strategy could in reality be considered a fraud. Some examples include:
- Churning: Where investment transactions and account activity or trades are done in order to generate commissions.
- Material Misrepresentations or Omissions: Where investment products, investments, investment strategies and risks are not properly or fully disclosed or explained to the investors.
- Concentration or Overconcentration: Investments recommended or investment strategies recommended include too many eggs in one basket. This can apply to individual investments, asset classes, types of securities products, sectors, or particular geographic exposure (for example too much exposure to Puerto Rico bonds).
- Unauthorized Trading: Where a broker or advisor takes discretion and executes transactions for an investor without any prior written authorization.
- Unsuitable Investments: A broker or advisor recommends investment transactions or an investment strategy that is not suitable and appropriate for an investor based on their age, economic situation, financial or other circumstances.
If you have questions or concerns regarding losses or the overall handling of your investment portfolio or your individual investments, please call the Investment Loss Recovery Group at 1-800-856-3352, a nationwide practice, and they will help you schedule a no-cost consultation and review.