Investing is risky. As an investor, you shoulder most of the risk, and there are no guarantees that you’ll see a return on your investment. Even losing money due to a financial advisor’s bad advice isn’t enough to take legal action as long as they follow government rules and regulations.
But when advisors violate Financial Industry Regulatory Authority (FINRA) rules, there are steps you can take to solve problems that arise with your investments. This can include an advisor who misrepresents or omits facts related to securities, one who invests in a security not suited to your objectives or makes trades without your permission.
Three steps for resolving disputes
If you believe you have a legitimate complaint with your advisor, it’s crucial to address those concerns immediately. Here are three possible ways to pursue an acceptable remedy:
- Contact the firm: If you believe your advisor exhibited improper or unfair conduct, submit a written complaint to the branch manager or compliance department. In some cases, firms quickly resolve misunderstandings or honest mistakes.
- Contact regulators: If you receive an unsatisfactory response from the firm, you can file a written complaint to FINRA’s Investor Complaint Center, the Securities and Exchange Commission (SEC) or state securities regulators. If these agencies detect violations, they can punish advisors who broke the rules, but they do not pursue claims for monetary damages.
- Dispute resolution: If you still disagree with the outcome or need to file for monetary compensation, you can proceed to the dispute resolution process. This may include arbitration, mediation or bringing a claim in state or federal court.
FINRA offers arbitration and mediation services. In some cases, these dispute resolution forums are available to non-FINRA members as long as both parties meet specific requirements.
Seek legal guidance when discrepancies arise
Registered financial advisors are trusted and legally required to put the client’s needs ahead of their own when managing their wealth. Mistakes, honest or otherwise, can cost investors dearly. If you suspect you have lost money due to an advisor’s fraudulent behavior, it’s advisable to seek experienced legal guidance at the beginning of the resolution process to protect your rights and ability to receive maximum compensation.
