Financial Industry Regulatory Authority (FINRA)
FINRA is a self-regulatory organization that administers the largest forum for arbitration of securities claims in the United States. Arbitration is the most widely used means of resolving disputes in the securities industry.
Click here for more information on the FINRA arbitration process.
Click here for more information on the FINRA mediation process.
What Are Typical Claims Against A Broker?
The vast majority of investor claims against their brokers fall into the following categories:
Fraud
This occurs when a broker intentionally lies to a customer in order to induce him or her to purchase or sell an investment.
Negligence
This claim alleges that the broker did not use due diligence, or care, and did not act in a reasonable manner when handling the client's investments.
Misrepresentation and/or Omissions
This claim asserts that the broker intentionally misled, negligently provided false information, or failed to disclose important information about an investment.
Unauthorized Trading
This occurs when a broker makes trades without the client's authorization or knowledge.
Excessive Trading (Churning)
This occurs when a broker engages in excessive buying and selling of investments in a customer's account solely to generate commissions that benefit the broker.
Unsuitability
This claim alleges that the broker invested the client's money in a way that was inappropriate for the client's investment goals.
Failure to Supervise
Brokerage firms have a duty to supervise their brokers and ensure compliance with applicable State and Federal laws, as well as Industry rules and regulations. This claim asserts that the firm failed to implement procedures to ensure compliance.
Selling Away
Brokerage firms perform due diligence in order to approve all investments that are offered. Selling away occurs when a broker sells, or solicits the sale of an investment not held or offered by the brokerage firms.
Breach of Diduciary Duty
Brokers have a legal obligation to act in the best interests of their clients, also known as a “fiduciary duty.” A claim for breach of fiduciary duty contends that the broker's actions were not careful or loyal to the client, and therefore, not in the client's best interest.
How to Check a Broker's Complaint History
You can check your broker's complaint history at FINRA's BrokerCheck website. Search the name of your broker and you will be provided with a report that discloses your broker's employment history, qualifications, and history of customer disputes. Go to FINRA Broker Check
How to Know One’s Rights as an Investor
Go to the North American Securities Administrators Association (NASAA) website to learn more.
Investor's Guide to Securities Industry Disputes: How to Prevent and Resolve Disputes with Your Broker
