1) Do I have a case against my stock broker?
Most losses in the stock market cannot be blamed on your broker. However, a broker has many specific legal obligations to their customer and if they fail to perform these obligations, they can be held responsible for losses in the customer’s account. The most common breach of duty committed by a broker is the recommendation to buy or hold a security that is not suitable in light of the customer’s financial situation and needs. Whether a trade is unsuitable depends on many detailed facts such as the net worth of the customer, their earning potential, account objectives, marital status, etc. When we meet to discuss your case, we may spend a great deal of time reviewing these personal details to determine the merits of your claim.
Even if you have a case against your broker, it might not be worth pursuing because amount of losses do not justify the expense of the action. These types of claims are very expensive and often require hiring expert witnesses who charge an hourly rate for time. During one of the early client consultations, and before we enter into a fee agreement, we will make an assessment and recommendation as to whether your case is worth the expense of pursuing.
2) Will my case be heard in court or in arbitration?
Virtually all account agreements with brokerage firms contain a mandatory binding arbitration clause. This means that if you signed an account agreement you must file your claim I arbitration rather than in court. The Financial Industry Regulatory Authority (FINRA), formally known as the NASD, is an organization that regulates security dealers. All brokers must be a member of FINRA in order to be a broker. FINRA has an arbitration department that will oversee the arbitration of your claim.
If you file an arbitration claim with FINRA, the case will be heard by a panel of three individual arbitrators. They serve as judges and make binding decisions as to whether you are entitled to an award and the amount of the award. The panel is normally comprised of a member of the securities industry and two public arbitrators who do not work in the securities field. Their decisions are usually not appealable and the awards must be paid within a short time after the award is entered.
3) What fees and costs will I be responsible for?
Our firm charges a contingent fee for handling these types of cases. This means that our fee will be a percentage of the total recovery. The percentage varies based upon when the case is resolved. If the case is settled early, the fee will be a lower percentage than if it is resolved closer to or after the hearing. The specific percentage will be discussed during our consultation and will be set forth in a written fee agreement.
In addition to our fee, you will be responsible for paying expert witness charges, filing fees, and other costs that the attorney incurs on your behalf. Sometimes these costs can be quite substantial. Therefore, we will normally discuss these before they are incurred.
