An Investor’s Story–The Making of a Winning Claim

Investors’ claims against a broker-dealer must be arbitrated. There is no right for an investor to make his or her claim in a court. So, there is no point in rehashing what we last said in this space. For the present, that is the law of the land.

Thus, when an investor’s arbitration claim is filed with the Financial Industry Regulatory Authority (FINRA), FINRA’s rules and procedures will govern all proceedings from filing to the arbitrators’ final decision.

The good news is that every arbitration and every trial presents an investor with the opportunity to tell a short story. There are at least two different endings. The person that tells the best story makes it easier for the arbitrators to want to write a good ending to it.

Remember, this is a competition. An investor without counsel materially increases the likelihood of his or her story being a flop. Every broker always has able counsel. Assuming that the investor has a lawyer, what can the investor do to do to maximize his or her chance of telling the winning story?

The Whole Truth and Nothing But the Truth

The overriding contribution that an investor can make to his or her own story is to tell counsel —the story’s editor and publisher— everything from the very beginning to the present without anything left out, particularly things that the investor thinks are unhelpful. A client failing to “tell all” to their lawyer would be fortunate if adverse information comes out before the arbitration. The damage may be limited at that juncture. If it comes out later, however, the damage is likely irreparable. The investor’s forthrightness and character are on the line

The next step for the client to take is to give the lawyer every scrap of paper, email, telephone record, calendar, note and doodle that even remotely concerns the relationship with the broker. In that regard, if you still have on line access to your electronic file at the brokerage, including monthly reports mailed to you by the broker- dealer, print out your entire file, page by page. At some point your on line documents will cease being automatically available to you. Also, produce for your lawyer all of the monthly reports actually mailed to you by your broker-dealer. You may think that is duplicative of the on line print outs. Let your lawyer decide that. If saved and available, download your every communication to and from the broker. In addition, collect every communication withothers that has any possibility of being related to the investment account. That includes things like emails to family members, friends and other consultants relating information about the account, your expectations, concerns and what the broker told you and when. If you have had prior or even subsequent dealings with other broker-dealers about the account in question, gather that information and give it to counsel. Those are not just words. Dealings with other brokers can have a material impact on your story, even if they seem to you unrelated.

Once Filed the Investor Lives or Dies by the Statement of Claim

After reviewing all of the data, investigating and consulting with an expert who agrees to testify that there was broker-dealer fault which caused your losses, the lawyer will compose your story in a Statement of Claim.Your role is far from over at this point.

The Statement of Claim will be as brief as the circumstances allow, as honest and forthright as it can be and seek to convince the arbitrator(s) that, if this Statement is proved, a grave wrong has been done. So, the investor has an abiding stake in what the Statement says relative to what can be proved. Stick to facts. A bunch of adjectives in a Statement does not strengthen it. To the contrary, it weakens it. No investor should be a rubber stamp for a Statement to be filed in his or her name.

The investor must be satisfied that he or she can steadfastly back up every assertion in the Statement. In every case, much of the evidence of what was said, done, omitted and committed necessarily will come from the lips of the investor. So dates, times, names, what came before and what came after are not mere details. Cases are rarely won by the sudden appearance of the smoking gun. They are won by the increasing mass of detail driving home the ultimate point bit by bit. So, with the assistance of counsel, the investor is the pile driver for the Statement of Claim and must view its preparation and content in no light but that light.

To be sure, as the case proceeds to the hearing and the Respondent reveals the broker-dealer’s defenses, there will be adjustments. Nonetheless, the Claimant’s (the investor’s) burden is to prove that the allegations of the Statement of Claim “more likely than not” are true. That phrase is what we mean by preponderance of the evidence. Make no mistake: meeting that burden of proof is on the investor, not on the broker-dealer.