By Nataliya Nemtseva, Spring 2014 Student Intern
Have you noticed transactions that you did not authorize or understand? Unusually high number of trades in your account? Substantial declines in the value of your investment? These and other signs may point to a broker’s misconduct. If something does not seem quite right about the investment activity in your account, it is worth looking into as it may be the result of a broker’s improper actions. While brokers cannot and should not guarantee the success of your investment, they also may not abuse their position of access or control to serve their own interests. If you suspect your broker of such activity, there are several things you can do.
Certain types of brokers’ conduct are improper. So, first, check to see if the suspicious activity falls into any of the categories of brokers’ prohibited conduct.
Once you have examined the suspicious activity and think it might be inappropriate, do not lose time! Gather all of your account statements, correspondence with your broker, and other documents that may support your suspicions. Begin by speaking with your broker about the issues you have noticed. If the broker’s answer does not alleviate your concerns, consider discussing the matter with the brokerage branch manager or compliance department. If you remain troubled by your broker’s activity, you may want to then proceed by contacting professional legal services to investigate whether misconduct has actually occurred and to determine the steps that should be taken towards the resolution of your matter.
You may have incurred losses as a result of your broker’s improper activity. Several avenues may be available to you for recovery. The majority of brokerage firm agreements that are signed by investors when opening an account specify that investors agree to resolve their disputes with the broker through a FINRA arbitration proceeding.
If you cannot afford an attorney and would like to pursue resolution through arbitration, you may qualify for free assistance. There are several securities arbitration clinics throughout the United States that offer free legal services to investors who have been harmed by broker misconduct but do not have the resources to hire a lawyer. These clinics are sponsored by law schools and are staffed by law students working under the supervision of securities lawyers. Find a clinic near you and contact it to see if you meet that clinic’s eligibility criteria.
Disciplining the Broker
Aggrieved investors may also file a complaint with the Financial Industry Regulatory Authority (FINRA), which regulates and oversees brokers and brokerage firms. This complaint process differs from arbitration, in that this process is regulatory in nature and is geared at protecting all investors. As such, FINRA can investigate a broker or brokerage firm’s compliance with industry rules and regulations, and take disciplinary actions, which may include fining, suspending, or even baring the broker from practicing in the securities industry if it finds misconduct. However, FINRA cannot give the investor, who filed the complaint, legal advice and, even if FINRA sanctions the broker or brokerage firm, it cannot guarantee that the investor will recover lost money or securities. Accordingly, investors should consult a legal professional if interested in receiving legal advice or compensation.