Most Common FINRA Arbitration Claims for 2023

If you have a dispute with your broker, your claim will be handled through the FINRA arbitration process.  This is separate from FINRA’s enforcement activities.  In other words, if you simply file a complaint with FINRA, that will likely not be sufficient to secure a recovery of your lost investment.   Rather, you will likely need to retain a Minnesota broker fraud attorney like Mark C. Santi to assist you with your claims. 

According to FINRA, the ten most common claims for 2023 as follows in descending order:

Breach of Fiduciary Duty

Fiduciary duties represent a very high standard of care that investment professionals must adhere to such as the duty of care, duty to act in good faith, and duty to avoid self-dealing.

Negligence

You have a negligence claim if your broker fails to comply with industry standards or fails to act as a reasonably prudent broker would under the circumstances of your case.

Failure to Supervise

A brokerage firm has a responsibility to supervise its brokers.  This is especially true if the broker has a record of prior misconduct or is on “heightened supervision.” You may have a securities claim if you suffered losses as the result of your brokerage firm’s failure to supervise its broker. You can research your broker’s professional background at http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/

Breach of Contract

You almost certainly entered into a Customer Agreement (or a document bearing a similar name) that requires the broker to comply with the rules of exchanges on which the broker trades. Thus, if your broker violated industry rules, or failed to adhere to the implied covenant of good faith and fair dealing in all Minnesota contracts, you may have a claim for breach of contract.

Misrepresentation

Your broker has an obligation to tell you the truth and to avoid misleading you.  If your broker fails to do so, you can assert a claim for misrepresentation.

Unsuitability

Brokers are obligated to ‘know their customer’ and to only make recommendations that are suitable.  For example, brokers are required to obtain information from you regarding your financial status, tax status, investment objectives, and other information that would reasonably be required when the broker recommends the trade.

Omission of Facts

Failure to disclose information involving a security may give rise to a claim for omission of facts.

Fraud

Fraud occurs when your broker makes a misrepresentation of a material fact which induces you to take an action, or inaction, that results in damages.

Breach of Regulation BI

As stated by the SEC, Regulation BI establishes “a "best interest" standard of conduct for broker-dealers and associated persons when they make a recommendation to a retail customer of any securities transaction or investment strategy involving securities, including recommendations of types of accounts.”

Violation of Blue Sky Laws

Each state, including Minnesota, has enacted regulations to protect investors from investment fraud.

If your broker has committed any of the above infractions, or others, please contact Minnesota stock broker fraud attorney Mark Santi of Santi Cerny, PLLC at 612-808-9082.

Investigation: Vita Intellectus, Josh Label, Moghis Mohammad

Mark Santi is investigating potential claims against Vita Intellectus, Josh Label, and Moghis Mohammad relating to high frequency trading. If you have suffered substantial losses, please contact Mark at 612-808-9082.

FINRA Levies $6.4 Million in Sanctions against Santander Securities LLC in Relation to Puerto Rican Bond Sales

FINRA, the Financial Industry Regulatory Authority, recently announced sanctions of $6.4 million dollars in relation to sales of Puerto Rican bonds.  According to FINRA, it found that Santander did not ensure its risk classification tool accurately reflected market risk of the bonds, and that Santander failed to adequately supervise its customer's use of margin and concentrated positions in their accounts.

Staggering losses have resulted from investor's concentrated positions in certain Puerto Rican bond funds, and the SEC has charged entities and individuals for improper sales practices involving the bonds.

Aggrieved investors are attempting to recover their losses through FINRA's arbitration process.

What is a Non-Public FINRA Arbitrator?

             A non-public FINRA arbitrator is thought of as an 'industry' person.  Investors are often concerned to have such arbitrators on their panel over the fear that industry arbitrators would be inclined to favor the industry, not the investor.  Others argue that these industry insiders would be willing, if not eager, to punish individuals who tarnish the industry’s reputation.  In any event, investors now have the right to choose whether there will be any non-public arbitrators on their panel.

                FINRA specifically defines who qualifies as a non-public arbitrator.  For instance, an arbitrator will be considered to be non-public if they presently, or within the past five years, were associated with a broker or a dealer, were registered under the Commodity Exchange Act, retired from - or spent a substantial portion of their career engaging in - business activities related to brokers, dealers, or members of a commodities exchange.  A full list of what experience will render someone a non-public arbitrator can be found in the code of arbitration procedure

See FINRA Code of Arbitration Procedure for Customer Disputes 12400(p).

Who is Eligible to Serve as Chairperson on a FINRA Arbitration Panel?

Chairpersons in customer disputes must:

1.        Be a public arbitrator

2.       Complete chairperson training

3.       Have a law degree

4.       Be a member of a bar of at least one jurisdiction

5.       Have served as an arbitrator through award on at least two arbitrations administered by a self-regulatory organization in which hearings were held

6.       Or, instead of items 3-5 have served as an arbitrator through award on at least three arbitrations administered by a self-regulatory organization in which hearings are held

See FINRA Code of Arbitration Procedure for Customer Disputes 12400.

How are FINRA Arbitrators Selected?

The Financial Industry Regulatory Authority (FINRA) maintains a roster of eligible arbitrators that correspond to the hearing location.  For example, if your securities arbitration will be held in Minneapolis, Minnesota, your pool of arbitrators will come from Minnesota and surrounding states. After arbitration is filed, FINRA generates a list of potential arbitrators from the aforementioned pool by using FINRA’s Neutral List Selection System.

The parties receive a list of potential non-public, public, and chairperson-eligible arbitrators.  After researching the arbitrators, the parties rank and strike them.  FINRA factors in the rankings and informs the parties of which three arbitrators will preside over the case.

See Rule 12400, FINRA Code of Arbitration Procedure for Customer Disputes.