Home » Business, Investing » Binary » How To File a Complaint Against a Broker

How To File a Complaint Against a Broker


This article will outline the options available to you for moving ahead with your claim, as well as what you should expect at each step. If you believe that your account has suffered losses at the hands of a broker or advisor, it may be time to move ahead with legal proceedings, check content box below to be able to walk around inside the article snugly.

Arbitration OR Litigation

Content Table
There are two available paths: Arbitration and the Court System.

While the processes differ significantly between the two venues, the preparation and time commitments are similar. Which path you will take will be determined by the regulatory agency that oversees the particular financial services company:

Stockbrokers and brokerage firms will be pursued via arbitration coordinated by FINRA. Even though brokers can use titles such as “financial planner” or “adviser” they are regulated under FINRA. While FINRA has designed its process to be handled by a non-legal entity, most people seek legal assistance at some point in the process.

For the majority of other types of disputes with fee-based advisers, mutual fund companies or trust companies regulated by the SEC or state regulators, the customer will pursue the dispute through the court system as plaintiffs.

Steps Before Filing a Claim

Content Table
Prior to filing a claim, and after exhausting all avenues within the company involved in the dispute, the case should be evaluated for validity. During the evaluation, it’s important to note that merely losing money in an investment account, whether a brokerage or managed account, is not always grounds for arbitration, mediation or litigation.

Considering the volatility of investments and varied time horizons, investors have historically experienced investment losses over some periods of time. If the customer has already used legal assistance at this point, the legal team will most likely retain an expert witness and look for clues. The witness (who is typically an analyst with an accounting and financial background) will be looking for tell-tale signs of unsuitability, churning, failure to supervise or negligence. Finding footprints of at least one of these violations is essential to defining a valid case. The use of an expert witness is vital in determining the measurement of recovery and setting forth the fact of damage.

Do not forget to like / share this article

Claim Steps

The most common theories of liability by arbitration claimants or securities-fraud plaintiffs are common-law fraud or violation of the Securities Exchange Act of 1934 [check PDF file here].

The claimants will pursue one of two avenues: seeking out-of-pocket losses or rescinding the actual transaction as a resolution. Each avenue can lead to similar settlements, and for the inexperienced it’s best to let the legal team decide the path.

Unsuitability

Content Table

24Option Your Binary Option Broker
Ad www.24Options.com
Earn $1000 in 3 Trades With High/Low Options From 24Option. Start For FREE.
IQ OPTION -#1 Rated Trading App
in 20 countries
Ad www.iq-option.com
+70 assets with profitability up to 90%.
60 Seconds Trading.
+3,000,000 Deals EVERY DAY.
+11,000,000 Trading ACCOUNTS
Open An Account For FREE.
What You Would Like To Trade Now?
Ad www.stock-pair.com
Choose Your Favorite Global Markets and Assets. 24 Hours a Day, Including Currencies, Commodities, Stocks, Indices and Pairs. Start Trading NOW.
NEW E-BOOK from BBinary
Ad www.B-Binary.com

Complete with an overview of binary options, asset info, and trading tips for beginners. Download Free Copy.
Are You Looking To Supplement Your Income?
Ad www.cherry-trade.com
use ifollow and copy our top traders success! and gain Up to 81% return. Open free Account

 

Unsuitability is one of the most common allegations, but one of the more difficult to prove due to its subjective nature. The plaintiff / claimant alleging unsuitability sets forth the fact that the broker or adviser knew, or should have known, that the trading patterns and/or type of security was inconsistent with the planned objectives. There is a significant amount of qualitative information to evaluate, as opposed to the quantitative evidence when investigating churning.

The evidence trail starts with documentation beginning at when the account was opened. The account-opening documents will most likely contain a risk profile of some sort defining the customer’s risk tolerance and time horizon. These documents have evolved into more detailed formats to better profile the customer in case of events like this.

A common practice is to rank a customer’s risk level from one to five, with a rank of five designating a high level of risk tolerance. If unsuitability is going to be pursued and a substantial amount of money has been lost in risky types of investments, it would be best if the profile was a low number. For example, a customer claiming unsuitability who has a tolerance profile of five would be hard-pressed in a proceeding to prove that the investment-loss claim was anything more than a “sore loser” complaint.

Churning

Content Table
Churning is one of the strongest allegations and one of the easiest to prove. It implies that the account was traded in excessive amounts and requires a certain level of broker control over the funds in order to be validated. In other words, just proving excessive trading is not sufficient evidence to claim churning, especially if the customer was instigating the trades on his or her own agenda.

Because of the nature of the dispute, churning is most common in transaction- or commission-based relationships. Also known as “excessive trading” it can be used as a separate claim where the commissions accumulated during the trading are requested as a recovery, or in conjunction with other claims where losses and commissions are the target of recovery. Either way, the calculation uses basic math and is easily understood by courts and arbitration panels.

The formula divides the total amount of transactions (buys and sells) by the un-leveraged account market values over monthly or annual time periods (monthly calculations are more accurate). While there are many opinions on how much trading is excessive, four to six times turnover has been recognized as an excessive amount in many cases.

When using the churning approach, it is important to remember that the defense will present contrasting evidence. If the client was making money during a previous time period, the defense will present the trading patterns during that time and request that the gains offset the losses.

Do not forget to like / share this article

Negligence

Content Table
Negligence and failure to supervise are not as frequently used, due to their subjectivity, but they can be strong components if proven. They tend to go hand-in-hand: if allegations of negligence are proved, there is usually a manager who has failed to act dutifully to supervise his or her employees.

Like churning, a certain amount of control needs to be present for negligence to take place. If the advisor controlled a significant number of trades and was negligent in execution, security selection, etc., then the case will have a basis.

Legal Proceedings

Content Table
In many cases, class-actions suits can occur simultaneously with individual suits. There are many benefits to pursuing claims with class actions, but for parties with unique claims, independent claims provide better control of the proceedings. The caution here is that individuals can exclude themselves inadvertently by filing a class-action suit first. Luckily, class-action filing papers provide a clear reference to this issue and offer an opt-out for those parties that plan to pursue their claims independently. Just like with all legal proceedings, the time frames need to be in perspective, as the courts have long waiting lists.

Any Option NonStop Trading
Ad www.any-option.com
24/7 Binary Options trading.
More than 200 markets.
Weekend specials.
Unlimited liquidity, fastest execution. Trade Now.
Invest In Binary Options Today. GET BEST PAYOUTS.
Ad www.binary-tilt.com
It’s So Easy. ANYONE CAN TRADE!
Get Instant Access To Your Profits. FAST WITHDRAWALS
Start Trading Now And Get DEPOSIT MATCH BONUS. Open Your Account.
Tools For Traders. Desktop, Mobile, iPad.
Ad www.hy-option.com
TRADE OVER 200 Assets. With A Regulated Broker.
Live Tradable Prices. ZERO Commission. Low Spread. Get Started.
Trade Forex, Commodities, Stocks and Indices.
Ad www.trade-rush.com
81% Profit in 15 Minutes.
Extreme Trading Online.
60 Second Option.
175% Returns. Profit NOW.
Start Trading With The Highest Industry Payouts.
Ad www.high-low.com
Up to 200% payout on trades.
Rich and visual application interface And MORE!! Profit NOW.

 

Just like in sports, legal proceedings are best approached with a strong team. Having a professionally trained legal staff adds depth to the case and provides additional backing for seeking a settlement. Selecting an attorney and an expert witness early in the process can change the direction of the proceedings early on.

As the markets ebb and flow, so do the attorneys who move in and out of the securities-litigation area. Personal-injury and trial lawyers have good crossover skills and are usually well positioned to handle court cases where trial experience is a must. Either way, it is important to use an attorney with at least some experience in the securities industry, as you can guarantee that the defending parties will be well informed.

As in any legal proceeding, it is important to set expectations reasonably, especially as concerns costs:

If your legal team decides your case is strong enough and large enough, it will most likely work on a contingency and share a percentage of the restitution.
If the team feels the case is borderline, you can expect to retain the team and prepay the expert between $2,000-$6,000 to prepare the case.
In addition, there are fees to be paid to FINRA for filing and fees associated with court proceedings.

Do not forget to like / share this article

Conclusion

Content Table
You should be prepared to be grilled in cross-examination in either venue by experts on the other side of the table. Firms take allegations seriously and have deep pockets to defend themselves. Also be prepared to accept any possible scenario, from winning the case with no compensation to losing the case and being held responsible for the entire cost of the court and legal fees.

FINRA has outlined the steps for filing a claim via arbitration on its website, and the average person can get a good start in the process. If litigation is the path, the SEC website can provide some basic information, but this would be a good time to hire an attorney.

Other Resources:

Content Table

Rate This Post Below:

1 Star2 Stars3 Stars4 Stars5 Stars6 Stars7 Stars8 Stars9 Stars10 Stars (2 votes, average: 10.00 out of 10)

Loading...

It’s Your Turn…

What do you think? Share your experience, opinion and insights in the comments box below.

Enjoyed this post!! So Join Monthly Newsletter:

Top & Regulated Online Forex Brokers:

AvaTrade Logo etoro logo small Easy-Forex Logo InstaForex Logo Markets Logo iforex logo
forextime logo XM Logo Windsor-Logo hymarkets-logo ezinvest logo fbs logo
ironfx logo newforex logos weltrade logo oxmarkets logo cmtrading logo nsfx logo
cashbackforex logo octafx logo trade12 logo nordfx logo gkfx logo cmstrader logo

Forex Brokers Lists (Click the Buttons):

Forex Regulated Brokers Islamic Forex Brokers
Forex Trading Robots VPS Hosting For
Forex Trading

Save

Save

Save

SaveUseful Sections (Click the Buttons):

Forex Reviews Forex
Polls
Quotes Sections Forex eBooks

 

Save

Save

Save

Save

Save

Save

Save

Save

Summary
How To File a Complaint Against a Broker
Article Name
How To File a Complaint Against a Broker
Description
If you believe that your account has suffered losses at the hands of a broker or advisor, it may be time to move...
Author
Zvezda Geek

About Zvezda Geek Team

Zvezda Geek , People around the world want and need to have a happy life and sure money is important tool that can bring things that make us happy. – See more at: http://zvezdageek.com/us/about-us/