Filing a Claim Against a Stockbroker or Financial Advisor

Apr 29, 2019

Stockbrokers (or ‘Brokers’) can be trusted competent professionals upon whom their clients can rely to safeguard their investments.  Unfortunately, even smart and competent stockbrokers and financial advisors can give clients bad or even fraudulent advice. In these circumstances, it is difficult for a client to know what their options are and when they need to seek legal counsel.

In this article, we will talk about:

  • Your rights as an investor
  • Researching your broker
  • Filing a complaint against your broker


Your Rights as an Investor

Financial laws and regulations vary state-by-state and may depend on whether the financial professional is a Registered Investment Advisor or registered representative of a broker-dealer. However, all investors have certain basic rights.


1. Truthful and Accurate Information

First and foremost, you have the right to honest and accurate information from your financial professional.  That information should include, at a minimum, the risks and costs of an investment product or strategy so that you can make an informed decision.  Before a proposed transaction takes places, you have the right to know:

  • Sales charges and commissions
  • Transaction or redemption fees
  • Service or maintenance charges
  • Penalties

If someone gave you false, misleading, or incomplete information about an investment, you may want to consult with a lawyer about your options.


2. Suitable Recommendations

You have the right to receive suitable recommendations from your financial advisors. The advice should be based on your income, assets, risk tolerance, circumstances, needs, tax status, and investment goals.  An investment that is a suitable investment for one investor may not be appropriate for another investor. It is a red flag if a financial advisor recommends an investment without becoming familiar with your individual circumstances such as income, assets, risk tolerance, needs, tax status, and investment goals.


3. Complete and Timely Written Communications

You also have a right to receive complete and timely communications from your financial professional before and after a proposed transaction.  Before making an investment decision, you should ask your broker what written information you will receive about the investment. The written information may include a prospectus or offering memorandum, research reports, and recent annual or quarterly reports.  If you only receive promotional or marketing materials, it is unlikely that you have complete and comprehensive information about the investment.

You should be able to understand the information conveyed in the communication.  If you do not, you can ask questions and request more information. If something does not seem accurate or is confusing, you can ask for an explanation.  The best time to ask questions about a product or strategy is before you have made the investment.


Researching Your Broker

Investors have numerous resources of information about brokers, firms, and investment advisors.  Brokers and brokerage firms are registered and regulated by the Financial Industry Regulatory Authority (FINRA).  FINRA maintains a database called BrokerCheck which contains a lot of information to enable investors to make informed choices about brokers and brokerage firms such as contact information, employment history, and licensing information.  In addition, BrokerCheck also contains information about regulatory actions, arbitrations and customer complaints.

You can also find information about investment advisers by contacting the securities regulator in your state.  The National American Securities Administrators Association (NASAA) maintains contact information for the securities regulators in each state.  You can visit NASAA’s website at or by calling (202) 737-0900. The is another useful source of information. You can find information regarding an investment adviser’s registration status and background information on the Securities and Exchange Commission’s (SEC) Investment Adviser Public Disclosure (IAPD) Program website at www.adviserinfo.


Filing a Complaint Against Your Broker

Almost all account agreements used by financial institutions contain a mandatory arbitration clause.  That means that a customer must file suit against a firm or financial professional in arbitration and not in state or federal court.  Arbitration claims against brokers and brokerage firms are filed with FINRA.

Before taking steps to file a complaint, FINRA recommends that customers attempt to informally resolve their dispute with a broker or brokerage firm.  This may be as simple as contacting the broker or the compliance department of the brokerage firm. It would be prudent to do so in writing only after consulting with a lawyer.  FINRA also has a mediation program whereby an impartial mediator facilitates negotiations between disputing parties with the goal of helping them to reach a mutually acceptable resolution to the dispute.

If you decide to file a claim, you will need to prepare a Statement of Claim which sets forth a description of the dispute, the parties that are participating and the amount of money you are seeking. You will also need to sign and file a Submission Agreement, which lists the parties in the arbitration case and confirms that FINRA is to be the administrator and that the parties agree to abide by FINRA’s rules of procedure. The person who files the claim must submit the appropriate fees to FINRA.

If you have suffered investment losses and believe it is the fault of a broker, brokerage firm, or another investment professional, it would be wise to hire a securities lawyer who specializes in securities law to discuss your options.



If you have any questions about securities law or you wish to engage the services of a securities lawyer, please call the Costello Law Group.  Tom Costello of the Costello Law Group has 25 years of experience in stockbroker misconduct and investment fraud.


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