Representation for Investors With Fraudulent Losses
Dennis E. Boyle, Attorney At Law, represents both defendants and victims in FINRA cases. From multi-millionaire private investors to the everyday retirement saver, we know from experience that no one is immune to investment fraud. We also understand how financially devastating a fraudulent loss can be. Fortunately, there are recovery options. We routinely help individuals recover from losses that result from the following:
Breach of Fiduciary Duty: Brokers and other investment professionals have a duty to make investment recommendations that are in their clients’ best interests. If a professional makes a recommendation that goes against this duty, he or she may be guilty of a breach of fiduciary duty. A common example of a breach of fiduciary duty as it relates to investing is recommending an investment solely to generate commission.
Misrepresentation: Misrepresentation occurs when an investment professional deprives an investor of the information necessary to make an informed decision. Common forms of misrepresentation occur when a professional misrepresents a company’s financial well-being, mischaracterizes the risk associated with an investment or withholds information regarding the fees and commissions associated with an investment.
Unsuitable Recommendations: Investment professionals have a legal obligation to provide their clients with “suitable” recommendations. A suitable recommendation is one that i) has a reasonable basis, ii) makes sense based on the investor’s financial profile and risk tolerance, and iii) is in line with the investor’s overall portfolio. Because unsuitable recommendations can cause unexpected losses, they are grounds for a FINRA claim.
Account Churning: Account churning, otherwise known as excessive trading, often involves the above three offenses and the excessive buying and selling of securities for the purposes of generating fees and commissions.
There are several other forms of investment fraud that can support claims in FINRA arbitration, including fraudulent statements, conflict of interest, failure to conduct due diligence, over concentration, unauthorized trading and pure negligence. Though unscrupulous investment professionals are often discreet in their transgressions, there are signs you can look for that may indicate you are the victim of investment fraud. Those include guarantees, complex strategies, account discrepancies, missing documentation and an overly pushy salesperson. If you suspect you are the victim of fraud, work with a knowledgeable attorney who can inform you of your rights, help you file a claim and represent you during the arbitration process.
The Arbitration Process Explained
All brokers agree to arbitration when opening an account, and you also agree to use FINRA dispute resolution, which is usually arbitration. This is typically an expedited process with a hearing that lasts a few days at most. Your case is eligible for arbitration if it is within six years of the time of the events leading to the claim.
This form of alternative dispute resolution involves you, the other party and one to three arbitrators that you and the other party select. You will be able to present your case, give testimony and provide evidence. The arbitrators will make a final, binding decision called an award.
The steps in the process include:
Hold prehearing conferences
Exchange information in discovery
FINRA is not a part of the arbitration process beyond providing a forum and helping to enforce payments of the award. The process must follow all SEC approved rules. It is confidential, and no part is publicly available except the final award.
Throughout the process, you have the right to try to reach a settlement, which your FINRA defense lawyer can assist with. About 69% of cases result in settlements, and only 18% go through the whole process. The remaining cases end due to withdrawing the case, bankruptcy or court stay actions.
Why You Need the Right Representation
Dealing with FINRA is not easy because of the authority it has. If charged with a FINRA violation, you must abide by Rule 8210 throughout the process, even after the organization begins its investigations. You may not have the rights you normally would in a criminal or civil situation.
You will have to deal with unique procedures and arbitration rules that are outside the norm. It is not the same as going through the legal system.
You must be able to defend against claims in accordance with the rules, which is not something that comes naturally. Since it is a niche area of law, you have to find a defense lawyer who is well-versed in this area of law and who understands how to deal with FINRA rules and procedures.
You may have an offer to use the attorney at your brokerage firm. However, this is a bad idea because it creates a conflict of interest, leaving you vulnerable. The firm's lawyer is going to look out for the greater good and may offer you up to save the firm.
You need a defense lawyer who can walk you through the process while serving as your advocate and looking out for only you. Your attorney can assist you with:
On the record depositions
Responding to Wells notices
Correcting filings or entries
Without proper legal representation, you can feel lost and confused by the process. You may even make decisions that carry long-term consequences. Your investment in your own legal defense is the right step to take because you will have someone on your side who understands what to expect and how to react.