When you open up a securities account with a securities firm, that is a broker-dealer, you are made to sign a number of different forms with lots of boiler-plate legal language in the forms you sign or in other forms which are "incorporated into" the form which you sign.
Contained in the forms and agreements of virtually every investment banking firm and broker dealer is a clause known as a "Predispute Arbitration Clause". That clause, which the United States Supreme Court held was enforceable in the 1987 case of Sherson/American Express v. McMahon, 482 U.S. 220, means that you, the investor, waive your right to sue your broker and the securities firm in court and agree to resolve any dispute you may have in arbitration.
What Is Arbitration?
So what is arbitration? Arbitration is a form of litigation presented to a panel of arbitrators who act as the judge and jury. The vast majority of securities claims are brought before FINRA, the Financial Industry Regulatory Association, a trade association populated by its member firms, including, in all likelihood, the securities broker-dealer with whom you have a dispute.
Arbitration is initiated by paying a filing fee and hearing session deposit (often $1,500 or more) and filing a "Statement of Claims" which is similar to a "Complaint" filed in court. Unlike court, there is limited discovery and no depositions or interrogatories to help limit or hone the issues. In some regards, a final hearing in arbitration is a "trial by ambush".
In arbitration the parties present evidence and testimony to the arbitrators at a final hearing. The arbitrators then issue a binding decision in the form of a written Award. If the arbitrators decide to award the Claimant (the party that initiated the arbitration) monetary and/or other relief, the Respondent (the party defending against the claims) has 30 days to satisfy the Award or risk expulsion from FINRA.
Contact Our Kentucky Lawyers For Help Holding Stockbrokers Accountable
Though securities arbitration is far from perfect, it remains the only avenue to litigate claims against your stockbroker and/or the firm with whom he or she is registered. Claims compelled into arbitration often involve stockbroker misconduct including churning, misrepresentations and omissions of material facts, unauthorized transactions, unsuitable transactions, over concentration and even theft, to name just a few.
If you believe you may have a claim against your stockbroker or financial adviser, contact us online or call us at 859-554-0495 to speak with a securities attorney. From our Lexington offices, we provide representation to people throughout the country.