Virtually every brokerage firm incorporates into its customer agreement a provision that if you have any type of dispute with the brokerage firm, you agree to resolve that dispute through the arbitration process. As a result, in order to recover for securities claims, investors must seek relief through arbitration. If you lost money due to broker negligence, our experienced attorneys are here to help.

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What is Securities Arbitration?

Securities arbitration is an alternative method in which to resolve your claim against the brokerage firm that was handling your brokerage account. Unlike a case that is filed and litigated in court, securities arbitration provides a private, not public, manner through which your case is resolved.

Almost all securities arbitration cases are filed with the Financial Industry Regulatory Authority (more commonly referred to as FINRA). FINRA has an established system and rules for the arbitration process.

The case is initiated by filing a “Statement of Claim,” which discusses the nature of the dispute and the relief sought (which is generally monetary compensation for losses).

Types of Securities Arbitration

The process of securities arbitration can help resolve many types of security fraud issues and cases involving broker negligence. Some of the most common types of claims we analyze and help clients settle via the securities arbitration process include:

Churning & Excessive Trading

Excessive trading, also referred to as “churning,” is a form of investment fraud that involves a broker trading securities in an investor’s account in an excessive manner that is not favorable or financially beneficial for the client. Typically, churning occurs as a result of trading in and out of stocks, but can also occur due to short-term trading in mutual funds, bonds, or annuities.


Misappropriation of funds occurs when a stockbroker uses a client’s funds for something other than what the client had requested. For example, if a client gives their broker a check for $5,000 to be deposited in their account, but the broker instead puts the check into their own account, this is misappropriation.

Failure to Diversify

Brokers are expected to mitigate risk to a client’s investment and diversify the type of investments a client holds. Some of the most common types of investments include bonds, stocks, and treasury bills. That being said, if a broker fails to diversify and increase return on a client’s investments, and the client instead loses money, this is failure to diversify, which is eligible to be settled by arbitration.

Unauthorized Trading

Unauthorized trading occurs when a broker purchases securities with a client’s non-discretionary account without the permission of the client. This is typically accompanied by churning, which generates funds for the broker, but costs investors.

Broker Misrepresentation or Omission

If a broker or brokerage firm misrepresents or omits information to a client concerning their investment, and the client’s investment suffers a loss as a result, the investor can recover damages via arbitration from the negligent broker or brokerage firm.

The Securities Arbitration Process

The attorneys at Oakes & Fosher can handle all aspects of the arbitration process on your behalf. The brokerage firm, thereafter, will file an “Answer” in which it provides its arguments and defenses. Unlike a court-tried case, there are no depositions or interrogatories. Instead, there is a standard exchange of documents and information, which applies to almost all cases.

If the parties are unable to settle their dispute (which is usually attempted after the exchange of documents), then the case is presented to an arbitration panel, which consists of three members who generally have a strong understanding of the securities industry as well as the duties and responsibilities of brokerage firms and their brokers. The hearing usually takes place in a private conference room within a hotel near the investor’s residence.

After the parties have submitted the evidence, the arbitration panel convenes to discuss the merits of the case and subsequently issues an award. If a monetary award is issued in favor of the investor, the brokerage firm has a maximum of 30 days to pay the award in full.

How a Securities Arbitration Attorney Can Help

If you believe that you have lost money due to a broker or brokerage firm’s negligence, you need to have an experienced securities arbitration attorney analyze your situation. An attorney can not only investigate your case and help you understand your rights but help you fight to recover the invested funds you lost due to the broker or brokerage firm’s negligence.

Oakes & Fosher dedicates its entire legal practice to helping investors across the nation. If you, or someone you know, believe you lost money as a result of a broker or brokerage firm’s negligence, please contact Oakes & Fosher today for a free and private consultation. We work on a contingency basis, which means there are no fees charged unless we collect for you.