frequently asked questions securities lawyer

Securities Questions You Might Have

There are many securities questions you might have. Here below are some common ones that our clients have asked us. If you have additional securities or arbitration questions or if you want more details, please contact us and we will be happy to assist you.

Contact us for a Free Consultation

Contact our office today to discuss your case. We offer a free initial consultation. You can reach us by phone at 801-366-5200 or via email. We try to take every case on a contingency basis which means we don’t collect a legal fee unless we successfully make a financial recovery for you.

What are my legal rights as an investor?

If you lost money in your stockbrokerage accounts you have the following legal rights:

  • You have the right to be represented by legal counsel in a proceeding against your brokerage firm;
  • Your broker has no right to contact you after you have retained an attorney;
  • You have the right to obtain documents and information that your broker maintained about you and your accounts;
  • You have the right to have your case presented before a panel of three arbitrators that will make a binding determination whether your brokerage firm was involved in any misconduct. The panel detrmines if you get all or some of your losses returned, costs and attorney’s fees;
  • With a favorable award, you have the right to be paid within 30 days.
I lost money in my brokerage accounts. Is it my broker’s fault?

Investments by nature involve some risk and uncertainty and your broker does not have a responsibility to ensure that you will make money. If your broker guarantees you will make money in a particular stock or in the stock market you should not invest any money with that broker. A broker is responsible to abide by all rules and regulations in the securities industry and to provide you with full and complete disclosures about the investments he is soliciting. If he does not he and/or his employer can be liable for your losses. In addition, a broker has a responsibility to understand your circumstances and financial needs and make recommendations appropriate for you. If he does not he and his firm could be liable for your losses.

What duties are owed to me by my broker?

Stockbrokers owe a duty of care and loyalty to their customers. Your broker is obligated to do the following in making recommendations to you:

  • Become informed about the investment before making any recommendation to you;
  • Tell you about the risks involved in any purchase or sale;
  • To learn about your investment objectives, your risk tolerance, your investment experience, financial position, and other personal facts;
  • Ensure that each recommendation is appropriate for your financial objectives and needs;
  • Disclose any conflict of interest in recommending a security, and refrain from putting his or her self-interests or the firm’s ahead of your interest;
  • Disclose all facts that a reasonable customer might find to be important to his or her investment decision;
  • Refrain from misrepresenting any fact that a reasonable customer might find to be important to his or her investment decision;
  • Refrain from transacting any purchase or sale until he or she obtains your express prior authorization to purchase or sell the security.
My broker is not a bad person. Will he be named in a complaint if I want to pursue a claim for my losses?

We usually do not name the broker personally in the claim, but only pursue the brokerage firm. When a broker’s conduct is egregious we may consider adding him or her but that is discussed in advance with the client.

After my broker opens my account and recommends investments, does he have an obligation to monitor my account?

One important obligation of a stock broker is to monitor your account(s) and to make recommendations consistent with changes in your economic and financial goals as your needs and objectives change as time goes on. Your broker is required to:

  • Regularly review your accounts to ensure that investments continued to be suitable, or appropriate for your needs and objectives;
  • Recommend which securities to purchase, sell, hold, or hedge;
  • Explain how news about an issuer’s financial performance could affect the performance of that issuer’s securities;
  • Determine which sources would best answer your questions concerning investments, and use information from appropriate sources to provide you with relevant information;
  • Keep you informed about your investments.

If your broker violates any of the above-described duties, and the violation caused you to lose money, you have a valid claim for damages.

The broker says my losses were caused by “the market.” Is that a valid defense?

It might be if the broker violated no laws, rules and regulations when handling your accounts. However, a broker is held to high standards when being entrusted with customer’s hard earned lifetime savings. If you lost a significant amount of money you owe it to yourself to contact an attorney that understands all the complex laws governing brokerage firms and be willing to answer some questions about what happened. A skilled attorney will be able to determine whether you have a case.

Does it cost me anything to consult with you about my case?

No. We do not charge for telephone conversations, meetings, and our review of your documents. It is all free of charge. We will ask you detailed questions about the professional relationship with your broker, what the expectations were when you opened your accounts, a little about your personal situation, past employment, experience with investing, and your dealings with other brokers. We might need to review your account statements.

What happens if you decide I have a case?

We will describe the nature of any suspected misconduct or wrongdoing, and give you an objective opinion about the chances of success in recovering your losses. We will discuss the filing fees and other hard costs necessary to proceed with your case and advise you that it might be helpful, although not required, to at some point retain the services of an expert witness that can help explain complex issues on your behalf to the arbitration panel. You will be given a fair idea of what these costs might be. After we’ve discussed the prospects of recovery going forward and costs involved, you decide if you want to move forward and enter into an attorney client agreement.

Will I have costs if you agree to take my case?

If we think you have a case, we will propose a contingent fee agreement. This means we collect our legal fees from any settlement or award. In most instances we require the client to pay for costs associated with pursuing your claim, such as filing fees and session fees assessed by the arbitration forum. Sometimes it is necessary to also retain a damage expert to determine your losses. We have excellent relationships with highly qualified damage analysis experts that are very reasonably priced. We can discuss costs with you in more detail. If you decide to retain us, we will propose a contingent fee and expense reimbursement agreement to ensure that you are fully informed before you retain us.

How long will it take before my case is concluded?

One real benefit to arbitration is the relative speed compared to court. Court cases can take several years, where arbitration, from beginning until an award is issued, takes 12 to 15 months. If the brokerage firm decides to settle, which occurs more often than not, the time is even less.

What is the arbitration process like?

Another nice benefit for our clients in arbitration proceedings is that depositions under oath prior to the hearing and extensive motion practice are generally prohibited. This makes it less stressful for most clients.

We file our clients’ arbitrations with the Financial Industry Regulatory Authority (FINRA) Dispute Resolution Forum. The arbitration starts with the filing of the claimant’s statement of claim and agreement to arbitrate. Brokerage firms are required to arbitrate. The statement of claim sets forth the background facts and legal theories that entitle you to recover. We spend a lot of time drafting a statement of claim because we want to make sure the arbitrators have a clear understanding of the broker’s wrongful acts and why you are entitled to recovery. The brokerage firm then files its Answer, which includes their responses and defenses to the allegations made in the Statement of Claim.

The parties will select a three-person arbitration panel (in cases with losses greater than $50,000) from a list of potential arbitrators provided by FINRA. In cases with $50,000 of loss or less, just one arbitrator decides the award. The attorneys have the right to strike a number of arbitrators from the lists and rank the remaining ones. The net highest ranking between the parties generally determines the panel composition. The chairman of the panel makes rulings on discovery issues. The outcome of the award is determined by a vote of the majority of the three arbitrators at the conclusion of the hearing.

At about the time a panel is appointed, the attorneys for the parties will serve document requests on each other. At this point, you will be required to produce certain documents, such as your account statements and trade confirmations. The brokerage firm will turn over documents about your accounts, agreements you signed, account opening forms, information about the recommended investments, the commissions the brokerage firm made off of your accounts, complaints of a similar nature, and so forth. Brokerage firms aren’t always cooperative, which requires us to ask the chairman of the panel to force them to turn over documents and information we are entitled to in order to put on your case.

With the documents we receive from the firm, together with those you provide to us, we are constantly shaping and fine tuning our presentation for the hearing. We will be handling almost everything for you and there will be very little for you to do, though we will keep you apprised of any important developments. As the hearing approaches, we will prepare you and the other witnesses to testify, including preparing you for cross examination by the brokerage firm’s lawyer. The hearing sessions are less formal than court, although the parties are sworn in prior to testifying. The hearings are usually in a large conference room in a hotel at the FINRA authorized city nearest where you live.

At the conclusion of the hearing, the arbitrators will confer and make a decision. It takes about 3-4 weeks to get the written award, which is the time the parties learn the arbitrator’s decision. There are very limited grounds in which an award can successfully be appealed. It is extremely rare that parties attempt to appeal any FINRA arbitration award.

What are the chances that I will recover some or all of my losses?

We cannot guarantee that you will recover anything, but the likelihood is very high. We are good at assessing the value of your case. Even though you suffered the account losses before you meet us, once we take your case on a contingent fee, our law firm is the one that accepts the greatest risk going forward. As a result, you should have comfort given we accepted your case. Most cases settle without the need for a hearing. But in order to settle, it often requires compromise from all parties. The odds are in your favor of a recovery if we accept your case.

How long do I have to bring my claims?

The FINRA Code of arbitration procedure says a claim must be filed within 6 years from the occurrence or event giving rise to the act, claim, dispute or controversy in order to be eligible for submission to arbitration. Just because a claim is eligible, does not mean a brokerage firm cannot defend on other timeliness issues. It is always best to bring a valid claim as soon as possible, without delay. The best thing is to seek legal advice as soon as you think your accounts have been mishandled.

Is there a minimum amount of loss necessary for us to take a case?

Generally, losses have to be greater than $40,000 to justify the intense work required to prosecute a case. However, there are some situations when we can take smaller cases if the facts are particularly strong. Contact us and we can discuss your facts.

Will regulatory authorities like the SEC, FINRA, or my state securities division help me recover my losses so I can avoid an arbitration?

No. Government agencies and regulatory authorities generally do not get involved in civil actions to help investors recover what they are entitled to.

Will the broker or brokerage firm settle with me if I complain or threaten to sue them?

It is not wise to attempt to write a complaint letter yourself in order to try to get the firm to settle with you. Almost never, no matter how strong your case is, will a firm offer to settle for more than a fraction of the value of your case and most of the time they will offer nothing. When a customer directly complains brokerage firms rarely if ever accept responsibility for misconduct and usually blame the market or someone else. After they deny your complaint and you are forced to retain an attorney, firms will then use your complaint letter against you for the purpose of obtaining admissions, inconsistencies, and to limit the scope of your complaint when a competent attorney drafts a statement of claim.