There is no question that it feels like the world has been turned upside down. COVID-19 has caused us to reevaluate many things in our lives. If you are stuck at home right now, you may be looking at your monthly investment account statements and wondering what happened to all of the investment gains? How could I have lost so much money in such a short period of time? When you call your broker to find out more information, is he or her simply telling you to stay the course and that the investments will come back? Are you being told by your broker not to look at your monthly account statements right now? Are you saying to yourself, “I thought that my investments were safe and conservative? Do you really understand what investments you own? How do you know if they are inappropriate for you?

You have probably heard the adage, “A rising tide lifts all boats.”  Well, there is another adage that may be applicable, “Investors don’t know if they lost their shorts until a low tide.” In good times, investors commonly are not able to identify bad investments because the values are increasing. However, during economic downturns, investment losses are glaring, and they are not necessarily caused by events related to COVID-19. They may be caused by mismanagement and bad investment recommendations by your trusted financial adviser.

It may be a good time to re-evaluate whether your trusted financial adviser and your investments are appropriate for your investment objectives and risk tolerance. This article explains where investment disputes are resolved and provides practical tips in hiring an attorney who may be able to give you a much needed second opinion about the appropriateness of your investments and who can potentially represent you to help recover your investment losses caused by unsuitable investment recommendations or worse, investment fraud.

Where are investment disputes resolved?

Investors that have suffered investment losses often are required to attempt to recoup their losses from brokerage firms and their representatives in a dispute resolution forum called arbitration.  FINRA is a regulatory entity that regulates the brokerage industry and also administers an arbitration forum for investors, brokerage firms, and their registered employees to resolve legal disputes in the U.S. through its network of 71 hearing locations, including at least one in each state and Puerto Rico.  In investor-related arbitrations, which are like informal court proceedings, arbitrators are selected by the parties and they act as the judge and the jury, deciding whether the respondent brokerage firms and/or their brokers are required to compensate investors for their losses. 

Should I hire an attorney?

Investors are entitled to represent themselves in FINRA arbitrations. However, investors should know that FINRA arbitrations are governed by procedural rules found in the FINRA Code of Arbitration and it can be difficult for investors going it alone to effectively represent themselves. Investors are best served by hiring an attorney to represent them in FINRA arbitrations. FINRA’s Code of Arbitration states that parties are entitled to be represented by an attorney at any stage of the arbitration proceeding.

There are many good reasons for investors to hire counsel.  For starters, aggrieved investors are often emotionally impacted by the dispute. It is a good idea to retain an attorney, because they are not emotionally connected to the problem and they will be able to provide objective legal advice. Furthermore, speaking with an attorney is confidential and protected by attorney-client privilege.  The attorney-client privilege allows investors to discuss the case in confidence so that they can better understand the strengths and weaknesses which lead to better decision-making.  Finally, communicating to the opposing side through an attorney helps to ensure that no evidence is created that could be harmful to investor clients’ interests.

What are some tips in selecting an attorney?

Just like not all financial advisers are created equal, not all attorneys are created equal.  It can be difficult to discern the good ones from the bad ones. Picking the right attorney is a personalized decision that is going to be unique to clients’ needs and preferences.  Below are some questions that you may want to ask before you select an attorney.

  • Does the attorney have experience representing investors in FINRA arbitrations?

Effective representation in FINRA arbitrations requires specialized legal knowledge of not only the investments that you were sold but also the legal procedures that apply to the arbitration process. As a result, selecting an attorney with experience in representing investors in FINRA arbitrations may be a good idea.

  • Does the attorney meet my needs?

It is important that you feel comfortable and trust that the attorney will effectively represent your interests.  Aggrieved investors commonly do not understand the extent of their harm and therefore they cannot fully or accurately describe their harm. As a result, a critical component to effective representation is the attorney’s ability to effectively communicate with his or her clients as well as opposing counsel.  Attorneys with experience in securities arbitrations should, among other things, be able to identify the underlying problems with the investments at issue, explain the legal duties owed by the financial professional and explain how the financial professional breached those legal duties to you.  

  • How is the attorney being paid?

Nothing in this world is free, including lawyers. Attorneys are paid under different arrangements. Many attorneys that specialize in representing investors in FINRA arbitrations will represent investors on a contingent fee basis, which means that the attorney is willing to advance their time with the hope and expectation of recovering money from the brokerage firm and/or the broker.  Be sure to read the fee agreement presented by the attorney to make sure that you understand the terms.  Don’t be afraid to ask questions!


[1] Jason Doss is the President of the PIABA Foundation is a 501(c)(3) charitable organization devoted to protecting investors through investor education. Jason Doss is also the current President of the Alliance For Investor Education and is a practicing attorney who represents investors in disputes with financial services firms and financial advisers for providing bad investment advice or worse committing investment fraud.

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