Performing an internet search for information about investment fraud reveals an almost shocking number of news stories on the topic. For example, a former broker and investment advisor was indicted on Aug. 5 in federal court for mail and securities fraud for allegedly persuading 20 or more investors – including churches, pastors and parishioners as well as his own adoptive mother and stepfather – to pay $5.2 million for investment in illegitimate securities, according to ThinkAdvisor.
Instead of making sound, lawful investments on the investors’ behalves, he is accused of spending their money on luxury items for himself and paying other people he had put into “Ponzi-like” schemes, to quote the U.S. Securities and Exchange Commission (SEC) complaint.
Investment fraud may be arbitrated in a FINRA forum
If you are suspicious about the legitimacy of investments your advisor or broker is supposed to be making for you or if you have already uncovered investment fraud, consider all potential legal remedies, including complaints, claims or lawsuits before state or federal agencies or courts.
You can file a complaint against your broker or advisor with the Financial Industry Regulatory Authority (FINRA), a nonprofit organization congressionally tasked with overseeing the broker-dealer industry. FINRA investigates the allegations and potentially disciplines the broker or their employer, including suspension or fines.
In addition, you may be able to recover your financial losses through FINRA’s robust alternate dispute resolution program that uses arbitration and mediation in which the parties may resolve their investment disputes outside of the courtroom.
You will want to seriously consider the option of FINRA arbitration, a vehicle for potentially recovering money or securities lost through investment fraud. FINRA provides the venue but does not adjudicate the matter.
For claims worth $50,000 to $100,000, the parties agree on a neutral, independent person to be the arbitrator and hold a live hearing. This arbitrator is like a private judge and their decision that is almost always final and binding on the parties without the right of appeal to a court. For claims over $100,000, there is a live hearing before a three-arbitrator panel. Claims up to $50,000 use one arbitrator who decides the claim based on documents without a hearing.
In part 2 of this post, we will delve deeper into FINRA arbitrations.