What Are the FINRA Requirements Your Broker Needs to Meet?
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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
Brokers and financial advisors are held to certain standards based on federal and state law. In addition, the Financial Industry Regulatory Authority (FINRA) creates specific rules that apply to financial industry professionals across the country. These rules require brokers to have licenses and meet certification standards, disclose certain information, and handle your finances in a professional manner. The FINRA arbitration attorneys at Epperson & Greenidge will discuss some of these requirements, and how investors can seek compensation after bad brokerage practices.
FINRA Rules for Broker-Dealers in the Financial Industry
First, FINRA is responsible for producing the examinations and certification standards required by law for practicing financial professionals. The Securities and Exchange Commission (SEC) requires broker-dealers across the country to have the proper certifications and licenses to practice. FINRA is the organization that writes these requirements and certifies professionals to enter the field.
After your broker passes their exams, they must also register with FINRA. This registration is required by SEC and FINRA rules and helps keep a record of their employment history, any complaints against them, and their current eligibility status. Any time a firm gains a new member, they must register again. FINRA keeps public records of this information on their website as part of their “BrokerCheck” service. This service allows you to look up the status and history of any broker or financial advisor so that you can see if they have a record of hopping from firm to firm or official complaints or claims lodged against them.
One interesting requirement FINRA enforces is that any public websites for a broker or brokerage firm must have a link to BrokerCheck. This makes it difficult for any firm or broker to hide their history by guiding potential customers away from BrokerCheck. Instead, there must be a clear box that links to BrokerCheck to make looking up a broker’s history of complaints easy.
Other FINRA rules (and SEC rules) require certain disclosures from your broker. Things like conflicts of interest that may interfere with your service, information on fees, and other required information must be given to you. Some particular investments, like mutual funds, also have required disclosures attached to them. If your broker fails to disclose information, you may not be making fully informed investment decisions. This could constitute a breach of contract for failing to give required disclosures as promised, and it could also constitute financial negligence.
Filing Claims for Arbitration Against a FINRA Broker for Violating Rules
If your broker violated FINRA rules, you might be entitled to file a claim against them. FINRA’s claims process has multiple options which allow an investor who suffered financial harm to file claims or complaints against their broker in the hope of gaining some benefit.
First, you can file a complaint against your broker, but this is unlikely to involve damages or compensation for you. Complaints are calls for sanctions and disciplinary measures when you’ve been wronged by a broker. Some people may prefer to merely file a complaint, but filing a different claim may result in compensation.
A FINRA claim can result in compensation or damages for the harms you faced from bad brokering or negligent guidance in your investments. You may file for mediation, which puts you and your broker in a room with a neutral third party to work out your case. This can result in getting some compensation or damages, but its results are not binding. Either party can also decide to leave mediation at any point.
An arbitration claim has significantly more force behind it. These claims are very similar to lawsuits, but instead of going before a judge and jury, you take your case to an arbiter. The arbiter (or a panel of 3 arbiters) will hold hearings, taking in evidence and testimony. They then decide your case and issue a binding ruling that often involves damages. Unlike mediation, a FINRA-registered broker cannot walk away from arbitration, and the arbiter’s rulings are binding.
By working in the financial industry and receiving FINRA certification, your broker is held accountable to their rules and requirements. Any time they fail to uphold FINRA’s rules and regulations, they could be harming their investors and must face penalties for it. Filing for arbitration is often the most effective way of getting your case vindicated and getting compensation.
FINRA Arbitration Lawyers for Investors
If you are an investor whose broker failed to follow FINRA rules and caused you financial harm, talk to our attorneys today. The FINRA claims lawyers at Epperson & Greenidge represent victims of negligent and fraudulent brokers and fight to get their clients compensation through FINRA arbitration hearings. For a free consultation on your claim, contact our law offices today at (877) 445-9261.