Frequently Asked Questions

Investment losses may result from market conditions or from broker or brokerage firm misconduct.  Misconduct that creates the right for an investor to pursue a claim for losses includes breach of contract, breach of fiduciary duty, negligence, misrepresentations or omissions, recommending unsuitable investments, Ponzi schemes, excessive trading and churning to generate excessive fees, or various types of fraud.

Call Marquardt Law Office LLC for a free evaluation of the conduct you believe caused your investment loss.

Marquardt Law Office LLC represents investors on a contingency fee basis, which means your attorney will only receive a fee if losses are recovered in your case.  The contingency fee will be based on a percentage of your total recovered losses.  If there is no recovery, you will not be responsible for any attorney’s fees.  In some cases, you may still be responsible for certain expenses, which will be discussed at the outset.  Contingency fee arrangements align attorneys’ interests with their clients’ interests to incentivize attorneys to achieve the best possible results for their clients.

The Financial Industry Regulatory Authority (FINRA) is an independent regulator formed under the Securities Exchange Act of 1934 that was passed by Congress, which is also the law that created the Securities Exchange Commission (SEC).  The SEC is the federal government agency that regulates the securities industry, and FINRA was formed to help the SEC enforce federal securities laws.

FINRA helps protect investors by regulating brokerage firms and over 630,000 individual registered representatives (i.e., brokers).  The SEC requires brokerage firms and the brokers they employ to register with FINRA and to follow FINRA’s rules.

FINRA’s rules require brokerage firms and brokers to resolve disputes with customers in FINRA’s arbitration forum.  The FINRA arbitration forum handles nearly 100 percent of securities arbitrations and mediations from hearing locations in all 50 states, Puerto Rico, and London.

FINRA arbitrators issue binding decisions that are not subject to appeals to appellate courts.  Claims in FINRA arbitration are brought by individuals who are generally represented by securities attorneys.  Contact Marquardt Law Office LLC for a free evaluation of whether you have a claim that may be brought in FINRA arbitration.

According to FINRA, nearly 100 percent of all investment customer securities-related disputes against brokerage firms and brokers are handled by FINRA arbitration.  There are two reasons FINRA arbitration handles most such claims, as opposed to civil courts.

First, the SEC requires brokerage firms and brokers to register with FINRA, which means they must follow FINRA’s rules, and FINRA’s rules require the firms and brokers to resolve all disputes with their customers in FINRA arbitration when the customer requests arbitration.

Second, when investors agree to use the services of investment brokers and brokerage firms, the investors sign agreements that usually contain binding arbitration clauses requiring the investors to resolve their disputes with their brokers and brokerage firms in FINRA arbitration.

FINRA arbitration is a streamlined litigation process in which one or three arbitrators are assigned to oversee claims.  They issue a decision after presiding over a hearing where parties present evidence and testimony and many rules of evidence are followed.  This is like court where a judge presides over a case decided by the judge or a jury following a trial.  Leading up to an arbitration hearing, written motions will typically be filed, subpoenas issued, and discovery conducted.  Like parties in court, parties in a FINRA arbitration are generally represented by lawyers.  FINRA arbitrators may decide whether the same substantive federal and state laws were violated, and award the same types of damages, as would a judge or jury.  In both FINRA arbitration and court cases, most claims are settled before a hearing or trial is conducted.

According to FINRA, the average FINRA arbitration claim is resolved in about 15 months.  This is typically much faster than proceeding in civil litigation where it may take several years before a case works its way through the courts.  The speed of arbitration is weighed against giving up some aspects of civil litigation, like the ability to depose witnesses during discovery and appeal decisions to appellate courts.

Claims proceeding in FINRA arbitration are not limited to claims alleging violations of FINRA’s rules.  Investor claims against their brokers and brokerage firms can proceed in FINRA arbitration on grounds that allege violations of all applicable rules and laws, including federal laws, state laws, and common law.  In fact, many investor claims are based on allegations that their broker and/or the broker’s firm are liable to an investor for common law claims like negligence or breach of fiduciary duty.

Brokers and brokerage firms are registered with FINRA and are contractually bound to arbitrate disputes with their customers in FINRA arbitration.  Awards granted by FINRA arbitrators are binding and, pursuant the Federal Arbitration Act, can be confirmed and enforced by judges in courts of law, giving them the same effect as any other judgment obtained in a court of law.

FINRA rules provide the option to elect to proceed with an expedited arbitration in the case of individuals who are senior in age or seriously ill.  Making such an election will prompt FINRA to expedite deadlines and hearing dates with the goal of a quicker resolution.

Marquardt Law Office LLC will handle all aspects of your litigation, advocating on your behalf from start to resolution at a hearing or trial.  When you contact Marquardt Law Office LLC, you will receive a free evaluation of your claim.  The firm will make every effort to utilize technology to the fullest to ensure documents necessary for your claim are gathered from you in the most streamlined and secure fashion, including by storing information on secured servers protected with encryption technology.  Marquardt Law Office LLC will provide you with the care your case deserves.

While FINRA and the SEC regulate the securities and financial industry and enforce violations of laws and regulations, they do not serve as personal representatives for investors.  Even when violations caused investors’ losses, SEC and FINRA enforcement efforts focus on sanctioning the offending firm or broker by admonishing them, barring or suspending them from the financial industry, or assessing them with monetary penalties that are paid to the SEC or FINRA rather than to the customers.  Thus, investors who have suffered losses will generally have to proceed with FINRA arbitration claims to recover their losses.

One of the ways that FINRA assists investors in recovering losses from broker and brokerage firm misconduct is by operating FINRA arbitration venues that allow the investors to pursue private claims.  Over 95% of investor disputes with brokers and brokerage firms are resolved in FINRA arbitration.

In the minority of cases where FINRA or the SEC obtains a disgorgement (i.e., confiscation) of ill-gotten gains from a broker or brokerage firm, they may retain that money or distribute it to the investor.  Even if the disgorgement is distributed to the investor, the investor may still have the right to pursue a private action.

SEC laws make brokerage firms responsible for the brokers they control, and SEC laws and FINRA rules require brokerage firms to supervise their brokers.  Additionally, under the common law, brokerage firms are responsible for the misconduct of their brokers because the brokers are agents of the brokerage firms.

Brokers work for firms who must supervise the brokers and are generally responsible for the brokers’ misconduct.  It usually makes sense to pursue a recovery from the firms because they are more likely to pay a settlement or award.  Depending on each individual situation, a recovery can be sought from both the firm and broker, only the brokerage firm, or only the broker.

Not infrequently, a broker has worked for multiple firms while his or her misconduct caused losses to an investor.  Determining which firm or combination of firms to seek a recovery from requires analyzing several factors to decide the best course of action to maximize a recovery.  For instance, some firms may be more culpable than others, and seeking to recover from too many firms may unnecessarily complicate a case.

If you believe you have suffered losses from your broker’s misconduct, contact Marquardt Law Office LLC today for a free evaluation on pursuing a recovery.

Yes.  Recoveries can be sought from the individual broker and/or one or multiple firms that employed the broker.  There are several strategic considerations to determine the appropriate combination of parties to seek recoveries from, which can be discussed with a securities attorney.  Contact Marquardt Law Office LLC to speak to a securities attorney and receive a free evaluation of your claim.

Often an individual invests with a broker employed by a brokerage firm who later changes firms one or more times, each time taking her clients with her.  There is nothing inherently wrong with a broker switching employers.  However, when that occurs, the investor may wonder which firm is responsible for his broker’s misconduct.  After all, investors do not always sign agreements with their broker’s new firms, and sometimes investors do not even know which firm currently employs their broker.

Generally, the new firms have agreed to be bound by the original agreement that an investor signed with the original firm employing the broker.  Additionally, firms are responsible for vetting the brokers that they hire.  A firm may be responsible for its broker’s misconduct, even if it no longer employs the broker, or if the broker’s course of misconduct began before the firm hired the broker.

The firms that may be responsible for a broker’s misconduct will depend on the facts of each claim.  There are many considerations regarding who it makes sense to seek recoveries from, which a securities attorney can evaluate.  Contact Marquardt Law Office LLC for a free evaluation from a securities attorney.

Brokers and brokerage firms may voluntarily withdraw their FINRA membership and leave the financial industry or be barred from FINRA by a regulator.  In such cases, it may still be possible to proceed with FINRA arbitration if the broker or brokerage firm agrees to submit to FINRA arbitration.  Additionally, in such situations a claim may be filed in court against a firm or broker who is no longer a member of FINRA.  Contact Marquardt Law Office LLC to receive a free evaluation of avenues of recovery.

Yes.  Many claims, including FINRA arbitration claims, are resolved through private mediation.  Additionally, venues such as the American Arbitration Association (AAA) and civil courts are available venues to pursue a claim.  Contact Marquardt Law Office LLC for a free evaluation if you believe you may have a securities or financial related claim.

Investors entrust large portions, sometimes all, of their savings with their financial advisors and the firms employing them, placing themselves in vulnerable positions.  Unfortunately, with that power, bad advisors can devastate an investor’s financial wellbeing.  Therefore, it is important to be vigilant.

Most importantly, if investors believe they have suffered losses due to misconduct, they should not hesitate to contact a securities attorney.  The ability to recover losses may diminish with the passage of time.  Do not be wary of pursuing your claim.  It is your right to do so, and private actions are part of the checks on financial professionals and institutions that may alert others in harm’s way.

Here are additional tips:

• Never write checks or wire money directly to a broker. There is never a good reason to send your money to an individual broker, and a request to do so is a red flag.
• Investigate a financial advisor’s background before agreeing to trust your hard-earned savings with them. There are several resources that provide public information on brokers’ backgrounds, such as FINRA’s Broker Check.
• Make sure you receive regular statements and review them. Mistakes, inconsistencies, or unrecognized transactions are red flags to investigate. 
• Be on alert when you hear promises of “can’t lose” investment products and strategies guaranteed to beat the markets. No one can predict the future with certainty, and brokers are required to disclose risks and provide fair and balanced communications.  
• If you grant a broker the power to make discretionary decisions with your investments, pay close attention to your statements. Review the expenses and the volume and size of transactions, as well as types of products that are traded.
• Ask questions and expect answers. Evasive or nonresponsive answers are red flags.  
• Do not allow financial professionals to fill out forms on your behalf, and if they do, do not just sign them without reviewing what was filled in.
• Make sure the risk tolerance levels in the forms that you complete accurately reflect your risk and ask questions to understand the different levels. Do not overestimate your risk tolerance.  Bad brokers use overestimated risk tolerance in forms as an excuse to sell unsuitably risky, high-commission investments.
• Firms sometimes send “comfort letters” to investors requesting they respond if they are unhappy with anything related to their accounts, and then later argue investors ratified an unsuitable course of conduct because they did not respond. If you receive such a letter, respond in writing if you have any questions or complaints.

If you believe you are the victim of misconduct in your accounts, consult an attorney sooner rather than later.  Call Marquardt Law Office LLC for a free evaluation of your claim.