Resolving Problems or Filing Complaints

Customer-complaint investigations

If you think you have been cheated, unfairly treated or been the subject of abusive sales practices by securities professionals you should contact your broker, orally and in writing, with copies to the manager and compliance officer of the firm. Ask for a written reply that explains the handling of your problem

If you aren't satisfied with the result, or if this process takes more than two weeks, you should
also contact the FINRA and file a written complaint with our office.

FINRA's customer-complaint programs
Virtually all brokerage firms registered in the U.S. to do business with the public are members of
FINRA and are regulated by it. It has regulatory responsibilities in the following areas:

  • Formulation of rules governing business and sales practices of its members and their sales representatives.
  • Review for fair dealing with customers.
  • Investigation of violations of securities laws and self-regulatory rules by member firms and sales representatives.
  • Testing, registration, and licensing of security-industry professionals.
  • Review of advertising and sales literature used by members.
  • Examination of firms' office practices and financial records.
  • The imposition of disciplinary sanctions.

The Attorney General's Bureau of Investment Protectiondoes not generally handle
complaints on behalf of individual investors, nor does it enforce the rules and regulations
governing the trading of securities unless such violations rise to the level of fraud. Your complaint may however be one in a series of similar complaints that indicates the need to investigate. The office maintains a database of complaints and investigates patterns of fraud
impacting many investors. It has the authority to commence civil or criminal actions on behalf of
the public.

Legal counsel
Consider consulting a lawyer for help resolving a securities dispute. While the Attorney
General's Office and the FINRA may investigate for violations of securities laws and rules these
organizations will generally not be able to get money back for investors. When a broker is
sanctioned for a violation, by the FINRA, for example, the broker isn't necessarily forced to repay
money you've lost. Sometimes, the only way for you to recover your investment is through a
lawsuit or arbitration.

Record-keeping
It's wise to keep copies of complaint letters you send and the responses you receive. These documents can be of great benefit to you later. Keep these in your investment file with monthly account statement, your copies of offering materials, and trade confirmations.

Arbitration and mediation of disputes
Most customer agreements with a securities broker/dealer include an "arbitration clause" that
requires arbitration if you have a dispute over your rights or liabilities under the agreement. Even if securities laws have been violated, this provision will almost always prevent you from filing a lawsuit. Instead, you will be required to take your complaint to binding arbitration.

There is no requirement that an investor must sign an agreement that requires arbitration
of disputes; if you don't, however, you will find it almost impossible to find a broker/dealer who
will do business with you. You may ask that the arbitration requirement be removed from the
agreement. In the event of a dispute, however, arbitration may be faster and less expensive than the courts.

What Is Arbitration?
Arbitration is a process of dispute resolution in which a neutral third person -- the arbitrator --
makes a decision after a hearing at which both parties have an opportunity to present their case. The FINRA offers the largest arbitration forum in the securities industry, but several other
arbitration forums are available to investors.

Arbitration is not part of the court system, and can be a quicker and a less expensive alternative
to filing a lawsuit. Because arbitration is binding and is subject to review by a court on a very
limited basis, an investor should seek legal advice before agreeing to arbitration.

What is Mediation?
Mediation is an informal alternative to arbitration. In the mediation process, a neutral third
person -- the mediator - helps disputing parties reach an agreement. Unlike an arbitrator, the
mediator has no power to impose a decision on the parties

The FINRA offers investors the option of voluntary mediation to settle disputes with firms or
brokers. While a typical arbitration case can take nearly a year, many mediation cased result in
settlements within weeks, according to the FINRA.

The Arbitration Process
The arbitration process begins when you file a claim and pay a filing fee with an arbitration
service.

Legal Representation
There are few formal rules governing either procedure or evidence at an arbitration hearing.
Both sides present evidence and the hearing seldom lasts more than a day or two. Do not be
misled into thinking arbitration is informal, like small claims court. Brokerage firms will always
be represented by attorneys at arbitration hearings. While it is not required, you should consider using an attorney, as well.

About the Arbitrator
A single arbitrator or a panel of three arbiters may hear cases. The size of the panel depends
upon the dollar amount of the claim. During the proceeding, the arbitrator will hold a hearing,
listen to oral testimony, review the evidence, and render a decision.

How are cases settled?
Arbitration hearings can be held at almost any location convenient to the parties. Arbitrators
usually are required to make a decision in 30 business days.

Arbitrators are not required to provide reasons for their decisions. Therefore, an investor can
lose a decision with little or no explanation as to why, and be unable to appeal to the court
system for relief.

The arbitration procedure is final and binding, with very limited review. For these reasons, an
investor should consult with legal counsel before arbitrating a dispute.

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