Is it Possible to Sue Your Stockbroker?

While many investment professionals do an excellent job for their clients, there are, unfortunately, situations in which investors must take legal action. But can a stockbroker be sued? In most cases, a stockbroker cannot be sued in civil court. However, this doesn’t mean that there is no legal recourse available to those who feel they’ve been negatively affected by the actions of an investment professional. As is explained below, Financial Industry Regulatory Authority (FINRA) arbitration provides investors with a way to recover for their losses.

FINRA Arbitration

As noted above, most grievances against stockbrokers are subject to FINRA arbitration. All broker-dealers must register with FINRA, which is the organization responsible for the regulation of stockbrokers and the enforcement of rules that govern the brokerage industry. One such rule requires broker-dealers to submit to customers’ demands for FINRA arbitration. But why can’t an investor sue a stockbroker in civil court if he or she so pleases? The answer to this question lies in the new account agreements executed between investors and their stockbrokers. Nearly all brokerage firm new account agreements include language that requires all disputes to be brought through FINRA’s arbitration forum. This means that an investor cannot sue his or her stockbroker in civil court. One advantage of FINA arbitration is that it tends to be more efficient than civil court litigation, as most cases are typically resolved within one year. Other differences between FINA arbitration and civil court litigation include:

• FINRA typically doesn’t permit depositions

• The FINRA arbitration discovery process is limited

• Most FINRA arbitration cases are decided by a panel of three arbitrators

An additional benefit of FINRA arbitration is that it is private. As opposed to a civil case, which generally is open to the public, FINRA arbitration documentation cannot be searched until a case is concluded and an award is issued.

Does FINRA Arbitration Favor Investors Or Stockbrokers?

Of primary interest to investors is whether FINRA arbitration tends to favor investors or their stockbrokers. Unfortunately, while FINRA has attempted to compile such statistics in the past, there is no clear answer to this question. However, as arbitration is considered final and binding with few to no appeal options, a successful investor is likely to receive financial recovery within approximately one month of the conclusion of an arbitration case.

Fort Lauderdale Investor Representation Attorney

At Simms Law, P.A., one of our primary focuses is the representation of investors. The financial markets can result in great gains and losses, so expert legal representation is a must when attempting to navigate this complex area. At Simms Law, we always take our clients’ concerns seriously and are aware of what is at stake when an investor suffers losses in the financial markets. Therefore, if you require expert legal guidance in Florida, please contact us for a consultation.