Dispute Resolution for Investors
If investors have a dispute with their broker or brokerage firm, they have two options:
- judicial dispute resolution
- extrajudicial dispute resolution (mediation and arbitration)
Judicial resolution involves hiring an attorney and filing a suit in a judicial court. This often leads to litigation where a judge or jury decides on the proper resolution of the conflict.
Extrajudicial resolution, like arbitration and mediation, involves resolution outside the courts. Instead of a judge or a jury, an arbitrator or mediator helps resolve the dispute between the investor and the broker/brokerage firm.
Which dispute resolution method should you use?
If you have a dispute with your broker, you should first check your brokerage account opening agreement. Look for the dispute resolution provision and see which dispute resolution procedure you have agreed to follow when you signed the agreement.
If your account agreement with your brokerage firm states that you agree to resolve any dispute with your broker through arbitration, then you really have no choice but to use arbitration. There's an exception to this rule, though. If the broker or brokerage firm is already out of business, you can pursue your dispute in court.
If your brokerage account opening agreement doesn't require you to use arbitration as the dispute resolution method, you may use litigation. Just remember through that litigation can be costly and that conflict resolution can take a long time. On the plus side, you have recourse to appeal if you don't agree with the court's resolution.
Arbitration versus Mediation
Arbitration and mediation are different from one another.
Mediation: In mediation, a mediator acts as a facilitator. He does not sit in judgment and he has no authority to decide the resolution of the dispute. His suggestions are just that - suggestions - and they cannot be legally binding on both parties. His aim is to help each of the parties understand where the other party is coming from.
As a facilitator, the mediator sits in the discussions/negotiations between the two conflicting parties. He helps the parties focus on the issues. He sums up the information presented by both parties. He points out the strengths and weaknesses of each party's position or claims. In the end, the conflicting parties themselves have to decide on a resolution to their dispute. The mediator cannot impose a decision.
Arbitration: In arbitration, an arbitrator (or a group of arbitrators) acts as a judge or jury. The arbitrator reviews the pleadings and documents (i.e. evidence) submitted by both parties. In the end, the arbitrator or arbitrators make a decision and award monies/damages as they see fit.
The disputing parties have to agree that they will abide by the decision of the arbitrator or arbitrators before arbitration proceedings commence. This makes an arbitrator or a group of arbitrators' decision legally binding.
Using mediation: You should try mediation before you try any other method of dispute resolution. Through mediation, you can try to settle your differences with the other party without going to a lot of expense. Mediation also usually offers a quick resolution. Even if no full resolution can be obtained through mediation, partial resolution is still possible. At the very least, the mediator can help you see the weaknesses in your case.
If you cannot reach a resolution with your broker through mediation, you can proceed to use arbitration (or even litigation if your brokerage account agreement permits it).
Dispute Resolution Tips for Investors
- Before deciding to sue or file an arbitration claim against a brokerage firm, investigate its background. If this firm goes under, it may not be able to meet the monetary damages you have been awarded by the court or arbitrator/s.
- If you want to initiate a dispute with your broker, make sure to do so immediately after you discover his wrongdoing. This applies whichever dispute resolution method you choose.
- If you are filing a case in federal court, make your move within 2 years of your discovery of your broker's culpability but no later than 5 years from the date of commission of the offense.
- If you are filing a case in state court, make your move within the required period as stated in your state's statute of limitations.
- If you are filing an arbitration claim with FINRA Dispute Resolution, make sure to make your claim no later than 6 years after the date of the commission of the offense.
- If you are filing an arbitration claim with some other organization, make sure to abide by that organization's deadline for arbitration claims.
Opening a OptionsHouse account to benefit from their low $3.95 stock trades (currently they offer 100 free trades) is a smart idea.
|Rate this article : Low
- Securities and Exchange Commission Complaint Procedures
- Telecommunications Technology Securities’ Fraud Alert
- Taking Note of Broker Discussions
- How to Obtain Corporate Reports
- Convertible Securities’ Risks to Common Stock Holders
- Choosing an Investment Professional
- Rebalancing Your Assets
- Tips for Variable Annuity Investors
- Investors Beware of Government Impersonators
- Options on Securing Your Securities
- Funds of Hedge Funds
- Investing in Hedge Funds: Pros and Cons
- Investor Alert: How to Avoid Investment Fraud
- What Happens When a Public Company Goes Private
- The Pros and Cons of Exchange-Traded Funds
- Investing in Equity-Indexed Annuities Explained
- What Are Promissory Notes and How to Avoid Promissory Note Fraud
- Investor Information: Finding Legal Help when in Dispute
- Dispute Resolution for Investors
- What Investors Need to Know about After-Hours Trading
- Tips for Researching Investments: Uncovering Analyst Conflicts of Interest
- Stock Analyst Recommendations - Should We Trust Them?
- Bank Demutualization - Frauds to Watch Out For
- Lost or Stolen Stock Certificate?
- Online Trading - Issues and Solutions
- Advice on Trading In Fast-Moving Markets
- How to Transfer Your Brokerage Account Smoothly
- Things to Consider When Opening a Brokerage Account
- Ex-Dividend Date - Why It Matters
- Investment Opportunities in Times of Financial Crisis
- Insider Trading Tracking
- Invest in Utility Stocks during Recession
- Why Price/Cash Flow is Important?
- Profit from Dividend Paying Stocks
- Simple Stock Selection Tips
- Year End Tax Planning and Portfolio Considerations
- Market Leaders and Stock Investing
- How to Select a Winning Company
- When to Apply Averaging Down
- Down Market and Discounted Stock Opportunities
- Stock Attachment Can Blur Our Judgment
- Buy Low - Sell High, Buy High - Sell Higher
- How to Select a Winning Stock from a 52-Week List
- Stock Market Trends and Signs
- Tips on Winning Stock Picks
- Government Deficit and Stock Investors
- Stock Price Forecast
- Speculative Derivatives Expiration
- Shunning Emotions from Stock Investing
- Constructing a Successful Stock Purchase Plan
- Economic Fundamentals Importance
- Positive Predictions on Interest Rates Move the Market
- Iran Events Might Influence the Stock Market
- Stock Market Movements
- Long-Term Stock Investing Advantages
- Take Emotions out of Stock Investment Decisions
- Market Timing Hidden Traps
- The Best Investment Style for Your Financial Objectives
- Dollar Cost Averaging Benefits
- Long-Term Rewards of Stock Investing
- Business Fundamentals vs Management Quality
- Tax Refund Investment Solutions
- Deep Debt Considerations
- Tangible Goals Motivate Investing
- Longevity Risk and Retirement Plans
- Has the Time for Selling Stocks Come
- Stock Tax Implications
- The Warren Buffett Way - Principals for Successful Investment
- Warren Buffet - Investing with Intelligence and Patience
- DRP Types and Benefits
- Avoiding Bad Stock
- High Risk, High Return
- Purchasing Your Company’s Stock
- Stock Portfolio Diversification
- Per-Share Price vs Market Cap
- Non-Financial Characteristics of a Successful Stock
- Institutional Investors and Their Influence on Stock Trading
- How to Benefit from Short Sellers
- When to Sell a Stock
- Assessment of Risk Tolerance
- Investment Risk Tolerance Level
- Investment Risk Types and Advices
- Bull and Bear Market Strategies
- Minimize Your Stock Losses
- Types of Stock Market Losses
- Stock Protection Options while You are Away
- Avoiding Stock Market Fraud and Scams
- Before You Buy Stocks
- When to Buy and Sell Stocks
- Stock Trader vs Company Investor
- Stock Diversification Tips
- Stock Buyback Benefits to Shareholders
- Stocks and Inflation Rate
- Allocating for Investing Purposes
- Stock Market Returns Pitfalls
- How to Avoid Pump and Dump Scams
- Tools and Researches Offered by the Best Online Stock Trading Sites
- Traditional IRA and Roth IRA Tax Benefits
- The Long-Term Scope of Stocks