Kass Shuler’s Investor Advocates
Following our initial consultation with a client, we determine the proper forum to file the lawsuit. For clients with brokerage accounts at FINRA regulated firms, their arbitration agreements typically direct disputes to be resolved in FINRA’s arbitration forum – FINRA Dispute Resolution. FINRA arbitration is similar to going to court, but can be faster, less expensive and less complex than traditional litigation in court. It is a formal alternative to state court, or federal court, litigation in which two or more parties select a neutral third party, called an arbitrator, to resolve the dispute. The arbitrator’s decision, called an award, is final and binding. There are very few instances where a FINRA arbitration award can be appealed. In resolving disputes through FINRA’s arbitration forum, a FINRA arbitrator or panel (consisting of three arbitrators) will listen to the arguments to the dispute, study the testimonial and evidence, and then render a decision.
For clients with accounts held at Registered Investment Advisors (“RIA”), the Investment Advisory Agreement typically dictates which arbitration forum will adjudicate the dispute (i.e., American Arbitration Association, Judicial Arbitration and Mediation Service, National Arbitration and Mediation, etc.) The process is similar to FINRA arbitration, however, each forum typically has its own set of rules and procedures.
For clients who do not have arbitration agreements, or for those who invested money with someone not regulated by FINRA or an RIA, they can file suit in state or federal court (depend largely on the investments at issue, amounts in dispute and the location of the parties). The litigation process in state or federal court typically moves at a slower pace and involves added discovery obligations.
If you have questions about a potential claim you may have against your financial advisor, please contact our office for a free initial consultation.
When you have lost money due to the negligence of your financial advisor, you have a limited amount of time to file a claim. The first time limitation is created by FINRA, and is referred to as the Eligibility Rule. Rule 12206 of FINRA’s Code of Arbitration states, in part, that “[n]o claim shall be eligible for submission to arbitration under the Code where six years have elapsed from the occurrence or event giving rise to the claim.” The rule does not extinguish a claim that is more than six years old, but it bars use of FINRA’s arbitration system to resolve the claim. What constitutes the “occurrence or event” that starts the clock running under Rule 12206 can vary based on the nature and/or scope of the claim.
The second limiting factor is the applicable statute of limitations. Federal and state courts enforce statutory cutoffs for brining different kinds of claims, which vary in length from one jurisdiction to another. A majority of courts around the country appear to draw no distinction between litigation and arbitration, ruling that such statute of limitations should be applied to arbitration. However, there are arguments to be made that the statute of limitations should not apply in arbitration. That said, arbitrators are given a great deal of discretion and unless the reasons for granting an award are specifically stated in the final arbitration award by the arbitrators, the appellate courts rarely vacate the same.
It is critical that you speak with an attorney as soon as possible to determine if your claim is within the statute of limitations and/or the Eligibility Rule. If you have questions about a potential claim you may have against your financial advisor, and you would like to determine if you are within the applicable limitations or eligibility period, please contact our office for a free initial consultation.
The first step in bringing a claim against financial advisor is to meet with an attorney in order to educate them on the underlying facts of the case. You will want to prepare a chronology of events and collect critical documents that will assist the lawyer evaluate the financial advisor’s potential exposure. You will then meet with the attorney, over the phone or in-person, to review the facts and tell them your story. Once the lawyer has this information, they should be in a position to complete a legal assessment of the claim. If the claim is viable, a demand letter will typically be sent to the financial advisor outlining the claim and making a demand for the funds that have been lost as a result of the advisor’s misconduct. If the demand is not met, the lawyer will typically prepare and file a Statement of Claim (or formal complaint) with FINRA dispute resolution. This will begin the formal arbitration process, which is explained in more detail here.
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