As an investor, noticing that your account made losses while at the hands of an advisor or broker might lead you to consider taking legal action. While pursuing the legal proceedings, you’ll notice that you have two options: making a class action lawsuit or seeking FINRA securities arbitration.
Class action lawsuits are proceedings meant to recover the damages for a class or group of investors that have sustained losses stemming from the same investment. Many individual investors opt to take part in class-action lawsuits due to having a loss too small to merit an otherwise individual claim. Others choose to pursue a class action when the investment’s procurement was not handled with a full-service brokerage firm.
On the other hand, the Financial Industry Regulatory Authority (FINRA) is a regulatory organization responsible for regulating and resolving disputes between brokerage firms and their investors. FINRA has established regulations and sales practice rules to govern brokerage firms and advisors’ responsibilities and duties in their interactions with investors. An investor can seek arbitration when a FINRA member breaks the set rules and regulations.
FINRA Arbitrations Versus Class Action Lawsuits
Class action lawsuits will generally be more profitable to groups of investors with smaller losses. Alternatively, FINRA securities arbitration claims are better suited for larger individual investor loss claims. The more significant an investment loss, the more cost-effective securities arbitration gets. Aside from that, going through the FINRA arbitration claim may lead to a more extensive recovery of the investor’s loss.
The primary reason why securities arbitration is often a better option is that arbitrators are in a better position to focus on the individual investor’s specific claim. Claims arbitrated through FINRA ultimately proceed faster than lawsuits with minimal costs for an appeal. FINRA also allows claims for damages on all the investments losses made suffered in an account rather than just a single investment.
An investor already taking part in a class-action suit against a company can also pursue an arbitration. In such an instance, the FINRA arbitration claim would be against the investment bank or brokerage firm that acted as the advisor to the client. An investor has different claims against both parties and may access multiple avenues to recover.
Is Arbitration the Better Option?
So, why pick arbitration over filing your claim in civil court against a stockbroker? The most significant advantage is that chances are an arbitration procedure will have your case resolved sooner than it would have had you gone to court. FINRA arbitration procedures can have your case settled in as little as several weeks or as long as nineteen months. Going to court, however, could mean waiting years before your case is closed and settled.
The other advantage of investors pursuing arbitration is that FINRA will hear the case. Through the lawsuit, professionals working to regulate security markets get to stop the evil misconduct of the brokerage firm or individuals involved. In the long run, this helps protect other investors who have entrusted in a particular firm from making a stock loss or any kind of further losses.
How Does FINRA Arbitration Hearing Work
Once you decide to proceed with arbitration, expect to plead and present your case before three arbitrators from FINRA. Get a lawyer for investment losses since they are equipped with the necessary skills to gather and present evidence, along with the right language to articulate your case correctly. The process is similar as it would be in a court. Arbitrators listen to all the evidence your attorney presents, then allow the accused stockbroker to defend themselves.
Next, the panel of arbitrators then begins to review both sides of the findings. Your case’s length could depend on how complicated your issue is, and the arbitrators may take up to eighteen months to deliver their decision.
Seek Redress for Unfair Losses
Stock losses can impair an individual’s financial security; attempting to regain unfair losses. As such, the case needs to be handled properly. When you have suffered a large chunk of losses due to what you suspect to be your brokerage firm or advisor’s negligence, remember that you can always seek redress.
As you move forward with the case, remember the importance of an attorney to ensure your evidence is appropriately collected and presented to help you recover the full extent of damages suffered.
