If you’ve ever experienced significant investment losses, you understand how harrowing the experience can be. While this situation might feel hopeless, you could recover some of, if not all, your losses.
Whether your investment losses are recoverable depends on your broker’s actions before you invest. Before discussing how to recover losses from failed investments, you must learn when you may have a case against your broker.
In this post, you’ll learn about:
- When you might be able to recover investment losses
- Pursuing FINRA claims
- What to do if you suspect broker fraud or negligence
- Why contacting an attorney can be helpful
When Can You Recover Investment Losses?
At the most basic level, you may be able to recover your investment losses if they are related to fraud or negligence on the part of your broker. Fraud and negligence can take many forms. However, most cases fall under three broad categories.
Here’s a closer look at each:
- Excessive Trading: In excessive trading cases, your broker may execute a high volume of trades too quickly without considering your investment goals. Brokers who make numerous trades quickly seek to maximize commissions at their clients’ expense.
- Misrepresentation occurs when a broker either fails to disclose investment-related risks or tells the client an investment is safe, only for the client to discover later it was not. Brokers are responsible for ensuring their clients have the information they need to make investments that align with their goals.
- Unsuitable Investment Recommendations: Your broker fails to consider factors such as liquid assets, investing goals, and experience when making recommendations.
Although investment losses often stem from market downturns rather than the actions of a broker, it is worth having your case evaluated by investment fraud attorneys if you have experienced significant losses in the relatively short term.
FINRA Arbitration: A Faster and Cheaper Alternative to Civil Court
Most investors in the United States agree to pursue claims through FINRA arbitration when they sign on as brokerage clients. Proceedings begin when a FINRA arbitration attorney submits a Statement of Claim to FINRA.
During the hearing, the investor and the broker present their cases. Arbitrators then decide whether the investor is entitled to recovery and the amount owed. Cases are typically resolved 12-18 months after a claim is filed.
A broker typically attempts to settle a valid claim before arbitration begins. Brokers and investors can agree to meet with a mediator before arbitration proceedings start to resolve their differences and agree on a settlement amount.
What To Do If You Suspect Broker Fraud or Negligence
If you suspect fraud or negligence on the part of your broker, begin documenting account irregularities immediately. Examples of negligence or fraud could include a sudden uptick in the volume of executed trades or posting unauthorized transactions.
At the same time, maintain a log of communications between you and your broker. Save all email correspondence with your broker. If your broker attempts to contact you by phone, record the date and time when the call occurred and take notes on the topic of conversation.
This documentation will help securities fraud attorneys evaluate your case and assess the likelihood of you recovering your investment losses.
Schedule a Consultation With a Securities Fraud Attorney
Once you have gathered all documentation relevant to your case, schedule consultations with several securities fraud attorneys as soon as possible. Most law firms will evaluate a claim at no cost to the investor.
During these consultations, an attorney will attempt to gather all pertinent information about the claim. Expect questions related to the following subjects:
- The size of your investment losses relative to your net worth
- Any education you have had related to investing in securities
- Your experience as an investor
After you have shared this information, an attorney will determine whether to pursue the case based on the available evidence and your investor profile. They will also recommend the best legal avenue for pursuing your case, with options including FINRA arbitration or civil court.
If You Suspect Wrongdoing On the Part of Your Broker, Don’t Wait
Although the statute of limitations for FINRA arbitration claims is six years, some are as short as one year. Contact a securities fraud attorney immediately if you’ve experienced significant investment losses. Even if your losses are recoverable, an attorney can provide you with guidance and a fighting chance in your case.
