I Lost Money Because of My Financial Advisor. Now What?
Investors hire securities attorneys to recover losses that resulted from their financial advisor’s misconduct. Investing always comes with some degree of risk, but financial advisors must follow regulator rules when they recommend securities and offer investing advice. When they break the rules, securities lawyers help investors recover as much of their losses as possible.
What Are the Most Common Types of Investor Fraud?
The Financial Industry Regulatory Authority (FINRA) maintains statistics regarding investor disputes. These are some of the most-cited reasons for investor complaints:
Financial advisors need to take common-sense steps to make sure their clients’ investments earn a return. FINRA could decide a broker engaged in negligence, for instance, if they failed to inform an investor about potential fee discounts.
Financial advisors should give accurate descriptions of their potential investments.
- Omission of Facts
Financial advisors cannot omit facts that could affect an investor’s decision. This might include details about how long the investor should hold the investment.
Financial advisors must “know their customers.” They have to take into account factors like age, financial goals, and risk tolerance before they recommend securities.
- Failure to Supervise
This complaint is directed at the brokerage or the firm. FINRA requires that member firms supervise their financial advisors. Supervision includes tasks like reviewing trades to make they fit FINRA’s suitability requirements.
Brokers and Investment Advisors: What’s the Difference?
Financial advisors could be either stockbrokers, or investment advisors, or both. Investors should know that registered investment advisors and brokers work under different sets of rules.
Let’s break down the main differences:
Brokers and investment advisors both recommend securities, but they have different regulators.
- Brokers are regulated by the Financial Industry Regulatory Authority (FINRA)
- Investment advisers are regulated by the Securities Exchange Commission (SEC)
Different Standards of Conduct
- Registered investment advisors are fiduciaries, meaning they are legally obligated to work in their client’s best interests.
- Brokers must follow suitability requirements when recommending securities, but they are not required to disclose as much information regarding potential conflicts of interest.
What Steps Should I Take to Recover My Losses?
When you start working with a financial advisor, you typically agree to settle disputes through FINRA arbitration instead of civil court. FINRA’s website states that arbitration is often a quicker way to settle disputes.
- File a Statement of Claim.
- The firm or brokerage might choose to settle with you or deny the claim. A denial does not mean you lost your case – it simply means that the brokerage isn’t willing to settle.
- Arbitration panel selection. Both parties have a say in panel selection.
- Arbitration hearing. Today, these hearings increasingly take place over Zoom.
How Much Does a Securities Lawyer Cost?
Fees depend on a variety of factors, but initial case evaluation are usually free. Securities lawyers often work on a contingency, meaning that they don’t get paid unless the investor wins their case.
When Should I File a Claim?
Investors have six years from the time the alleged financial misconduct to file their claim.
Why Do I Need a Securities Lawyer for Arbitration?
Investors are not required to have securities lawyers, but studies suggest that lawyers can have a positive impact on the investor’s outcome. Firms and brokerages sometimes have an unfair advantage and more insider information on the potential panel members. You are not required to hire an attorney for arbitration, but according to FINRA, brokerages are almost always represented by a lawyer.
With a securities attorney, you’ll be able to present a more confident case. And since they only get paid when you win, they’re motivated to do everything they can to help.