Time, Tide and FINRA Customer Disputes Wait for No One

By Benjamin Stubbs, Spring 2014 Student Intern

timeThere’s an old saying that time and tide wait for no man.  This may be obvious to you, but what you may not know is that FINRA customer disputes won’t wait either, not more than six years anyway.  In this sense, FINRA arbitration claims are no different than any other legal claim brought in court.

Why time limits?

Most legal claims are subject to statutes of limitations that establish time limits for plaintiffs to bring claims.  If claims are brought after the established time limit, courts will generally not hear those claims unless extenuating circumstances are present.  The purpose of these time limits is to promote justice.  The reasoning is that people with genuine complaints will act diligently and promptly, that evidence supporting or defending against a claim will be lost, forgotten or destroyed if people wait too long to bring a claim and that society benefits from the stability and finality that time limits offer.  For customer disputes, FINRA has adopted a similar limit, known as the Eligibility Rule.

How long do you have to file a customer dispute?

FINRA’s Eligibility Rule, Rule 12206(a), provides that customer claims are eligible for FINRA arbitration only if they are brought within six years of the date “from the occurrence or event giving rise to the claim.”  At first glance, this rule seems simple enough.  But parties may argue over the date of the event that gave rise to the claim.  The Eleventh Circuit, in a case called Kidder, Peabody & Co., Inc. v. Brandt, held that the event giving rise to a claim is the last event that was necessary to establish all of the elements of the claim.  The court noted also that establishing all of the elements of a claim depends on the nature of the claim, such that sometimes a single event establishes the elements for a claim and that other times several separate events must be established.  In short, it’s not always easy to know when six years have passed and whether your claim is eligible for FINRA arbitration.

Because FINRA gives customers only a six-year window to file a claim and because it can be debatable when that window begins, it is important for you to act quickly if you think you have a claim.  If you suspect wrongdoing or mistakes related to your account, check your records first to make sure you’re not overlooking something.  If that doesn’t solve your issue, call your broker immediately for clarification.  After discussing the problem with your broker, you may wish to contact an attorney.  The Investor Advocacy Clinic may be able to assist you.   Contact our clinic to see if we can help.  Remember, act fast because the window closes a little more each day.

What if you miss the six-year window?

If you bring your claim before FINRA too late, your broker will probably try to get your claim dismissed, which means FINRA’s arbitration panel would not hear your claim.  If the panel dismisses your claim, however, that does not necessarily mean your claim is hopeless.  FINRA Rules 12206(b) and (c), provide that such claims may still be brought in court.  However, Rule 12206 “does not extend applicable statutes of limitations.”  The result is that if your claim is dismissed from FINRA because it is filed too late, you can only take your claim to court if the time limit that governs that court’s ability to hear your claim has not already passed.

Pay attention and act promptly.

own timeGiven FINRA’s time restriction, it’s important to pay close attention to your investment account and to act quickly when you think there may be a problem with it.  So check our blog for helpful tips on how to monitor your account and be better prepared to spot events that may give rise to a claim, and if you find one, act fast because even though FINRA is more patient than time and tide, it won’t wait forever.