How to Sue Your Financial Advisor or Broker | Sonn Law Group (2024)

Trusting a financial advisor or broker with your economic well-being is a significant decision, and most professionals in this field handle their responsibilities with diligence and integrity. However, there are instances when they fail in their obligations, leading to serious financial consequences for their clients through negligence or deliberate misconduct. If you’ve experienced substantial losses in your investment accounts, it’s important to understand your rights and the legal options available to address these wrongs.

At Sonn Law Group, we specialize in helping clients navigate these turbulent waters and ensure you can hold your financial advisor accountable. This article will guide you through initiating a lawsuit or arbitration, identify common grounds for claims and clarify the steps you need to take to seek financial restitution.

By the end of this guide, you’ll have a clear understanding of your legal avenues for recovery and how to proceed if you believe your financial advisor has failed in their duty to you.

Understanding the Grounds for Suing Your Financial Advisor

If your financial advisor or broker has not adhered to theFinancial Industry Regulatory Authority (FINRA)rules, guidelines or other regulatory standards, causing financial losses, you may have the right to seek compensation. Under theInvestment Advisers Act of 1940, certain investment professionals, includingregistered investment advisors (RIAs)and some financial advisors, owe fiduciary obligations to their customers.

Breaches of this duty can occur through negligence — such as failing to perform with required competence — or through more direct misconduct like fraud, theft or makingunsuitable investmentrecommendations for personal gain.

Sonn Law Group specializes in evaluating these complex cases to determine the most effective legal path for our clients, ensuring rigorous assessment and pursuit of all viable claims to recover losses and uphold investor rights.

Understanding Arbitration and Legal Actions

When disputes involve financial advisors or brokers, individuals have two main avenues for resolution: arbitration through FINRA or pursuing a lawsuit in court. Each option has its specific advantages and considerations.

Arbitrationis generally faster and less expensive than court litigation. It is a private process where an impartial arbitrator hears the evidence and makes a binding decision, usually within 12-18 months. The proceedings are confidential, which helps keep sensitive information private, and the process offers flexibility in setting schedules and selecting arbitrators. However, parties are free to disclose information about their own arbitration. And, once an arbitration award decision is reached, it is final, with minimal options for appeal.

Litigation, on the other hand, involves resolving disputes in court and is more formal and rigid due to strict procedural rules. While this method can be more costly and time-consuming, it provides a public record of proceedings and the potential for appealing unfavorable decisions, which might influence future cases.

In many cases, investors are not eligible to file a lawsuit against their stockbroker or financial advisor. This is because most investment account agreements containmandatory arbitration provisionsthat require disputes to be settled through arbitration instead of litigation. These clauses significantly shape how claims are handled, making it imperative to understand their implications on your ability to sue.

If there is a pre-dispute arbitration clause in the agreement you signed with your broker or brokerage firm, you’ll almost certainly be required to seek compensation through the FINRA arbitration process. The good news is that FINRA arbitration is much like a mini-trial. In many cases, there is an evidentiary hearing, where you have the right to testify, offer fact witnesses and expert testimony, and cross-examine your financial advisor and their supervisors. If your arbitration claim is successful, you may be issued a FINRA arbitration award that includes financial compensation for the full value of your losses.

While the FINRA arbitration process is somewhat similar to traditional litigation, there are some important differences that only an experienced arbitration lawyer can handle. If you are filing a FINRA arbitration claim against a bad broker, you should work with a qualified and experienced investment fraud attorney who knows the intricacies of FINRA’s arbitration rules, regulations and industry practices.

Experienced attorneys, like those at Sonn Law Group, specialize in navigating both arbitration and litigation processes. They ensure that all procedural requirements are met and aim to secure the best possible outcome for their clients.

Steps To Take Before Filing a Claim

When considering legal action for investment fraud or disputes with your financial advisor, it’s essential to prepare thoroughly. Here are the steps to ensure you’re ready:

1. Document Collection and Review: Start by gathering all relevant financial documents. This includes account statements, trade confirmations, emails and any correspondence with your financial advisor. Also, gather financial records such as bank statements, tax documents or investment prospectuses. These documents can reveal unauthorized transactions, excessive trading and other irregularities that might indicate fraud or negligence.
2. Consulting With an Attorney: Consult an experienced securities fraud attorney before proceeding. They’ll thoroughly review your collected documents and assess the strength of your case, focusing on proving that your financial representative committed wrongdoing and demonstrating the link between this misconduct and your financial losses. This evaluation is vital, as most investment fraud claims are highly complex and require a strong, persuasive legal strategy.
3. Determining the Best Course of Action: Your lawyer will advise you on the best course of action, whether pursuing FINRA arbitration or court litigation and will outline the potential costs and timeline. Some factors include resolution speed, cost-effectiveness, privacy and the potential for appeal. Additionally, the choice may depend on the specific legal requirements of your case, such as the need for detailed evidence presentation or expert testimonies.

These steps will prepare you for the legal process and better prepare you for a successful outcome.

What To Expect From the Legal Process

Understanding the legal process for securities fraud claims empowers investors to participate in their own defense and ensures they can make informed decisions about their financial recovery. Here’s a streamlined overview of what to expect:

Timeline and Procedures

Arbitrationtypically resolves within 12-18 months and involves a more straightforward process that includes filing a statement of claim, document exchanges during discovery and a hearing leading to a binding decision.Litigation, however, can often extend over 2-4 years or more due to extensive discovery, pre-trial hearings and a formal trial that may lead to lengthy appeals.

Potential Outcomes and Settlements

Successful securities fraud claims can lead to many outcomes, including monetary damages compensating for losses, rescission of fraudulent transactions or other forms of equitable relief such as injunctions. Settlements are common, where parties agree to resolve the dispute without a trial, allowing clients to recover losses more quickly and with fewer expenses.

Costs and Fees

Costs vary based on the chosen legal route. In arbitration, you might face filing fees ranging from $750 – $2,200 and additional costs for arbitrator’s fees, FINRA administrative fees, expert fees, exhibits and graphics expenses, among others. In litigation, expenses can be significantly higher due to the costs of depositions and other costs related to discovery and expert witnesses. Most attorneys handling securities fraud operate on a contingency fee basis, and in some cases, the attorneys will front costs and seek reimbursem*nt if the case is successful.

Regulatory Framework and Investor Protections

Understanding the role and responsibilities of key regulatory bodies is essential for investors seeking to protect their financial interests. Here is what you should know about each and how they provide avenues for recourse in investment fraud:

Role of FINRA and SEC

FINRA is a self-regulatory organization that oversees broker-dealers and their representatives. It sets standards of conduct, examines compliance, investigates violations and takes disciplinary actions. FINRA also provides an arbitration forum for resolving disputes between investors and financial advisors. TheSecurities and Exchange Commission (SEC), a federal government agency, enforces securities laws, mandates disclosure from public companies and oversees key industry participants. It prosecutes civil enforcement actions against violators of securities laws, enhancing transparency and accountability in the marketplace.

Ethical Standards and Violations

Key regulations like the SEC’s “Best Interests” rule, aka Reg BI, and FINRA rules of conduct provide the standards of care for investor protection, which ensures brokers recommend investments that are in the best interests of the client, and consistent with a client’s objectives, risk tolerance, age, time horizon for investing, tax implications, and financial circ*mstances and needs. The SEC’s anti-fraud provisions also prohibit deceptive practices in securities markets. Investment advisors are also bound by fiduciary duties to place the client’s best interests ahead of their own and to reduce or eliminate conflicts. Violations of these regulations can lead to disciplinary actions, lawsuits and some cases, criminal charges.

Investor Rights and Legal Recourse

Investors have several recourse options against financial misconduct. They can engage in FINRA arbitration, a private, binding process tailored to resolve disputes quickly. Alternatively, investors can file regulatory complaints with the SEC regarding unethical activities or pursue civil court litigation, such as securities fraud lawsuits. These mechanisms allow investors to seek justice and compensation for financial wrongs.

Contact Sonn Law To Determine if You Can Sue Your Financial Advisor

If you have lost a large amount of money in an investment, you know how awful it feels. It’s stressful, frustrating, and, worse, it can be financially ruinous. Sonn Law Group provides a robust representation, to seek the full compensation you deserve.

With extensive experience in both FINRA arbitration and court litigation, our team has helped investors recover losses due to stockbroker fraud and financial advisor misconduct for over 36 years. Our attorneys work on a contingency fee basis, meaning we only get paid if we successfully help you recover your losses.

We offer a free, no-strings-attached case evaluation to discuss your legal options and the best path forward. If you suspect misconduct has led to substantial losses in your investments,contact ustoday for a free consultation.