FINRA Securities Arbitration

If your brokerage account has large unexplained losses, you’ve noticed many transactions in your account within a short period of time, or are just “treading water” after many years of partnering with a brokerage company, you may be a victim of investor abuse.

Even the most seasoned investor can unwittingly fall into this trap, but a FINRA arbitration attorney can help.

If you’re not familiar with the FINRA securities arbitration process, the first thing to know is that FINRA stands for Financial Industry Regulatory Authority.

This is the non-profit, non-governmental organization that regulates registered brokers and broker-dealer firms in the United States. FINRA’s roster of almost 8,000 arbitrators are well-established professionals in a broad range of fields, from business to legal. They strive to maintain an impartial and fair dispute resolution system.

What is the FINRA Arbitration Process?

When you open an account with a brokerage firm, you sign paperwork containing an “arbitration agreement” in fine print, waving your right to file a lawsuit against them.

Instead, you are required to seek compensation in arbitration, which is where FINRA comes into play. Any investor claims against broker-dealers or investment advisors must be submitted to this self-regulatory body.

The advantage of the FINRA securities arbitration process is that it’s usually faster and less formal than a typical lawsuit in court. Here are the four essential steps you need to follow:

1.    Your FINRA attorney prepares a “Statement of Claim” explaining the circumstances that lead to your financial loss. The brokerage firm then needs to file an answer within 45 days.

2.    A panel discussion takes place in which you and the financial institution agree on selecting the FINRA arbitrators in charge of the arbitration proceedings. One to three arbitrators are selected, depending on the size of the damages. For damages under $50,000, FINRA will settle the claim based only on the legal briefs of your securities arbitration lawyer.

3.    This is the discovery phase in which your broker misconduct attorney asks the brokerage firm for related documents, such as account statements and receipts.

4.    The final step is the hearing, followed by a decision within 30 days.

5.    The entire FINRA arbitration process usually takes between 12 and 18 months and, with minor exceptions, decisions are final. This is why it’s crucial to choose an experienced FINRA arbitration lawyer that is well-versed in the intricacies of FINRA arbitration procedures. Depending how complex your case is, there will be time limitations to file your claim. Make sure you act quickly to preserve your rights and recover your losses.

At Kelly, Grossman & Kerrigan, LLP, we’ve successfully represented nationwide investors in securities or investment-related disputes with broker or brokerage firms through the FINRA Dispute Resolution forum.

Common Forms of Stockbroker Misconduct

Below we have provided a list of common forms of broker misconduct:


Churning occurs when a broker buys and sells stock for the purpose of generating excessive commissions. Often times this misconduct is not so clear and can occur through the use of confusing “mark-up” and “mark-down” transactions where the true cost of the commission charged is not always openly disclosed to the investor. Excessive trading is something all investors should be aware of as well as being alert of the details of all commissions no matter the size.

Unauthorized Trading

This happens when a broker and/or brokerage firm buys and sells investments for the customer’s account(s) without their consent.


Brokers and advisers are required to make custom investment recommendations based on the customer’s specific situation and investment goals. Unfortunately, we often see that recommended investments do not meet the investor’s profile. Instead, they stem from other intentions, such as ensuring additional compensation to brokers and brokerage firms, or promoting a firms’ “stock of the day.”

Failure to Supervise

Brokerage firms and their supervisory personnel have a duty to oversee their brokers’ accounts to ensure that investors’ money is correctly handled. Similarly, compliance personnel at the brokerage firm must reasonably supervise with a view to preventing violations and FINRA’s rules.


Negligence occurs when a fiduciary fails to take proper care in fulfilling his or her duties. A broker has a fiduciary duty to properly invest customers’ money, according to their account objectives and investment experience.

Selling Away

This happens when a broker sells his/her client securities or other products that are not overseen or offered by their brokerage firm. Selling away can often be found where the broker is promoting products such as private placements and certain real estate investments.

If you believe that you are a victim of broker misconduct, please call our office at (631) 314-4996 for a free initial consultation, or, complete the contact form below.

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