FINRA Dispute Resolution vs. Filing a Complaint: Which Option is Right for Investors?
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As reported in InvestmentNews, three Raymond James entities have agreed to pay over $15 million to resolve an investigation by the SEC. The settlement and SEC order focused on Raymond James’s actions in improperly charging certain clients advisory fees when the...read more
The Financial Industry Regulatory Authority, or FINRA, is a non-governmental agency that monitors stockbrokers, brokerage firms, and investment advisors to ensure that they are complying with federal laws and treating investors fairly. If an investor thinks that he or she was a victim of broker fraud, or suspects that a financial advisor acted improperly, the investor can ask FINRA to investigate the matter. There are two basic ways that an investor can bring securities fraud to FINRA’s attention: by filing a complaint with FINRA, or by entering a FINRA dispute resolution process, namely arbitration or mediation. The question is, how do these procedures differ, and which is the better option? Read on to hear FINRA arbitration lawyer Dietrich Epperson’s explanation of the difference between filing an investor complaint, and filing for arbitration or mediation.
How Does FINRA Help Investors with Stockbroker Fraud?
It’s important for investors to understand that FINRA is not a law firm, and does not provide legal representation for investors. What FINRA does do is provide a legal platform, similar to a court system, where defrauded investors can voice their grievances, present evidence of broker fraud, and seek formal remedies.
When an investor has suffered serious financial losses because a broker acted improperly, FINRA acts like a neutral third party and investigates the investor’s allegations. If FINRA finds that wrongdoing occurred – such as trade churning (excessive trading), identity theft, unauthorized trading, the recommendation of unsuitable investments, or in some cases, sheer financial negligence – it can penalize the noncompliant broker or brokerage firm, and potentially, compensate the investor.
How is Filing an Investor Complaint Different from FINRA Dispute Resolution?
If an investor has a financial issue with a broker or brokerage firm which cannot be independently resolved, there are two ways the investor can seek assistance from FINRA:
- Filing an investor complaint with FINRA.
- Participating in a FINRA dispute resolution program, such as mediation or arbitration.
This is not an “either-or” option: an investor is free to file a complaint and enter dispute resolution. What’s essential to understand is that they are separate procedures – and critically, that only one of them allows the investor to recover compensation.
Filing a complaint alerts FINRA that a broker or brokerage firm may have engaged in misconduct or fraud. FINRA will investigate the complaint, and, if it uncovers evidence to support the allegations in the complaint, is authorized to impose a wide range of penalties and sanctions, including monetary sanctions, restitution orders, suspensions, and possibly censures.
However, even if FINRA penalizes the broker after reviewing the complaint, that does not necessarily mean that the investor will be compensated. If the investor’s goal is financial recovery, he or she will need to participate in dispute resolution. That means that, instead of or in addition to filing a complaint, the investor will also need to file a claim for arbitration or mediation, which are the two dispute resolution options that FINRA currently offers.
Filing a complaint is typically a fast and easy process. As long as he or she has reliable internet access, an investor can file a complaint online in less than twenty minutes. To file an investor complaint about a stockbroker or financial advisor online, simply follow the instructions on FINRA’s website. Filing for FINRA arbitration or mediation is a more involved process, and requires guidance from an experienced attorney who is licensed to handle securities fraud claims on behalf of investors. For a comparison of FINRA arbitration and FINRA mediation, see our previous article here.
FINRA Arbitration Attorneys Offering Free Consultations
FINRA attorney Dietrich Epperson has extensive experience handling a wide variety of securities and investment fraud-related claims on behalf of investors, including small business owners, senior citizens, retirees, homeowners, and others. The FINRA law firm of Epperson & Greenidge, P.A. represents investors who were defrauded by stockbrokers, brokerage firms, and financial advisors using fraud schemes such as Ponzi schemes, pyramid schemes, identity theft, trade churning, unsuitable investments, unauthorized trading, omission, breach of contract, and other FINRA violations.
If you or a family member recently lost a significant amount of money, or saw a suspicious decrease in your investment portfolio, and believe that a stockbroker or investment advisor is to blame, Epperson & Greenidge can fight aggressively to recover your losses and restore your financial stability. For a free legal consultation about the types of claims we handle for investors, contact Epperson & Greenidge, P.A. online, or call us today at (877) 445-9261.