What follows is what an investor can do about a cheating broker when aided by an experienced lawyer. The overwhelming number of investors who open a brokerage account have already waived in writing their right to sue a broker in court before a jury for what may be life wrecking bad conduct and advice.
Buried in every New Account Agreement Form of every retail brokerage company in the country is the investor’s voluntary agreement never to sue. It sounds incredible, but when you opened your account you signed it and, if you refused to sign, you would not have an account. An injured person may go to court against his lawyer, doctor, bus driver, retail store or practically any business or individual, BUT AN INVESTOR MAY NOT SUE HIS BROKER.
So, under our national setup, when an investor is terribly harmed by deceit, fraud, negligence or any other bad conduct by a trusted broker, there is one choice: GET A LAWYER EXPERIENCED IN COMBATING BROKER NEGLIGENCE, FRAUD AND BAD CONDUCT and prosecute the claim in the new non-judicial forum, called the Financial Industry Regulatory Authority (FINRA), which has replaced our prized court and jury system. When an investor is victimized by his broker, the hopeless dream is to think that the brokerage will give the money back because the investor thought he and his broker, Bernie, were pals. If the world ever worked that way, we all know now that it no longer does. And, to be blunt an investor asserting a grievance in this new FINRA world without experienced counsel may as well save the filing fee and surrender.
There are no dramas on stage, TV or in the movies called FINRA. The vast majority of Americans have never heard of it. But, it is the only refuge to save even part of your retirement, your widowed spouse’s care funds, kids’ college fund, a planned second home, your grandkids’ future or any other worthwhile financial goal that you want to salvage from the calamity of betrayal.
FINRA IS FAR FROM THE FAMILIAR AMERICAN COURTROOM. Indeed, only a small fraction of lawyers in the country have dealt with FINRA or its complex rules, regulations and procedures. Many of those few lawyers belong to a professional organization called the Public Investor Arbitration Bar Association (www.PIABA.org), a specialty bar of a handful of lawyers around the country who devote their law practices to advocating the rights of wronged investors.
A little about the place where an investor must now plead for justice and redress:
- FINRA calls itself the largest independent regulator of securities firms doing business with the public in the United States
- Under a contract it regulates the New York Stock Exchange, NASDAQ and multiple other markets as well as the over- the- counter securities markets
- FINRA’S rules and regulations are reviewed and approved by the Securities and Exchange Commission
- Nearly 5,000 brokerage firms belong to and fund FINRA
- More than one-half million registered representatives are part of FINRA
Registered representatives do the sales work for broker-dealer companies, many well known to the general public. Registered reps are salespeople. Sometimes they and their bosses call them “financial advisers”, at best a misleading phrase.
The brokerage firms that belong to FINRA have all agreed to arbitrate claims made against them by investors in front of arbitration panels appointed by FINRA. They have also agreed to put a provision in each investor’s account opening agreement requiring every investor to agree that claims for bad conduct by brokers never go to court. Brokers believe that they are better off avoiding the courts. Indeed, there is credible evidence that investors would fare far better against