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Securities Arbitration on the Rise

By Oguz Ozdemir

It is really no surprise that the Financial Regulatory Authority, or FINRA, has seen arbitration cases rise dramatically in the past few years. FINRA is the watch dog for over 5,000 financial brokerage firms across the country.

By May of 2009, there was an 85% increase in the number of investment fraud claims that were filed against stockbrokers. Last year in the first five months of the year there were 1,711 claims filed and this year at the same time there were 3,163. Those numbers show that more and more brokers are using fraudulent tactics to make money with no regard to their clients or their own future. You can only do this so much before you have to face the music and at this time, more cases than ever are being ruled in favor of the claimant.

The SEC has made it harder for deceptive brokers and financial planners to bully their way through the system. Recent rulings have put restrictions on how many times the defendant can file a motion to dismiss. In the past, the motions and costs would add up and many claimants gave up on arbitration because they couldn't afford to proceed.

The number one cause for securities arbitration is a breach of fiduciary duty. When a broker takes on an investor it is his obligation to always act in the best interest of his client. This means that he or she should not misrepresent an investment opportunity. A full disclosure of investments must be presented to the investor and it should not benefit the broker at the investor's expense.

These may seem like common sense, good business practices and customer service that you would expect from someone who is holding your financial future in their hands. But since the mortgage market plunged in 2007, the number of arbitration cases involving fraudulent investment practices from stockbrokers had more than doubled.

In 2007 there were 3,238 fraudulent securities cases filed, by 2008 there were 4,982. But industry experts expect the number of cases to reach 7,000 by the end of 2009. That means more than twice as many cases in just two years.

FINRA is doing its part by enforcing the rules and regulations by which it holds these securities firms and their brokers. The agency took over for the National Association of Securities Dealers in July of 2007. They serve as arbitrators in resolving these cases between investors and the fraudulent practices of many investment brokers and their firms.

If you have been the recipient of a breach of fiduciary duty, or suffered financial difficulties due to misrepresentation by a broker or a securities firm, please contact the attorneys at Napoli Bern Ripka. Our trained staff has extensive experience and knows exactly how to get you through the arbitration process. The consultation is free, so give us a call at 1-888-LAW-IN-NY or fill out our Quick Contact form on this website.

Originally posted at InjuryBoard by Oguz Ozdemir

Full post as published by New York City Personal Injury Lawyer on September 01, 2009 (boomark / email).