The loss of hard-earned investment funds can leave you in financial ruin. It can negatively impact your credit accounts, family finances, and emotional well-being. When recovering your investment losses, a lawyer is a valuable asset. Investment fraud lawyers can help you pursue a claim in FINRA arbitration or file a securities fraud lawsuit.
Private Litigation
Investors who believe they have lost money due to brokerage firm negligence or misconduct can file an arbitration claim through FINRA. Such suits can cover a range of activities, including unauthorized trading, misrepresentations, or unsuitable investments. If successful, these types of claims can recover a substantial amount of an investor’s financial losses.
FINRA arbitration can also investigate allegations of fraud or misconduct committed by individual brokers and registered investment advisors (RIAs). Such cases may include failing to meet fiduciary obligations, such as recommending securities not in their client’s best interests. Similarly, RIAs and stockbrokers must keep accurate records of their transactions with customers. Failure to do so may result in violating the securities laws and a loss on your investment.
Another common type of investment loss involves market manipulation. It can take on various forms, such as artificially inflating the price of a company’s stock price through false statements or spreading rumors to manipulate trading volume. If found guilty, offenders can face criminal penalties and civil litigation from investors seeking compensation for their losses. Investors are urged to contact an experienced New York investment fraud lawyer immediately if they suspect they have lost funds due to fraudulent activity. An attorney specializing in securities law can thoroughly evaluate the case and determine whether a client has grounds for recovering their losses.
Disgorgement Funds
While private litigation can effectively recover investment losses, some cases may be better suited for recovery through disgorgement funds. Regulatory agencies set these up to collect money from individuals and companies who have violated securities laws. The money is then distributed to victims of the fraud. A few years ago, the Supreme Court issued a ruling called Kokesh v. SEC that addressed whether or not SEC disgorgement satisfies the requirements of an equitable remedy. The case involved an investment adviser who misappropriated $34.9 million from four business development businesses he managed. The Court ruled that SEC disgorgement meets the requirements of an equitable remedy because it takes away the wrongdoer’s ill-gotten gains. However, the Court added a significant limitation in this context. It held that a disgorgement order cannot exceed a wrongdoer’s net profits (gross profits less legitimate expenses) because to do otherwise would be an unfair punishment. While this is a limited restriction on the power of disgorgement, it is essential because it helps limit the ability of SEC enforcement attorneys to engage in overly aggressive tactics designed to punish wrongdoers rather than serve as legitimate equitable relief. In the right circumstances, a skilled securities fraud attorney can use disgorgement funds to help investors recover their financial losses.
Broker-Dealer Insolvency
Brokerage firms must adhere to minimum net capital requirements to lessen the likelihood of going bankrupt and join the Securities Investor Protection Corporation (SIPC). While FINRA promotes multiple safeguards that offer protection in “rare cases” where a brokerage firm goes bankrupt, investors need to keep organized records of their securities and accounts because in the event a firm does go under, those documents may be required to prove that you are entitled to your lost investment. If a brokerage firm goes bankrupt, a court-appointed trustee will marshal and distribute the company’s assets to creditors and customers. The trustee will seek to transfer customer accounts to a financially stable brokerage firm. In bankruptcy and SIPC liquidation, customer claims are prioritized over general unsecured creditors, such as lenders extending margin credit and foreign exchange traders.
During a broker-dealer liquidation, investors will likely need to wait months to see whether or not their lost investments are returned to them. A broker-dealer liquidation can take time to finalize because it can take time to verify whether or not a customer has filed a claim. To expedite the process, clients file a claim as soon as possible and to make sure it is completed accurately.
Securities Law Violations
When a financial advisor or brokerage firm breaks state and federal securities laws, investors can often recover their losses through the Securities Investor Protection Corporation (SIPC). While SIPC is not a replacement for proper investment due diligence, it can help victims of brokerage insolvency. Additionally, if the accused broker or firm committed fraud and is found liable by a court, disgorgement funds may be available for harmed investors. Securities law violations can take many forms, including Ponzi schemes, unregistered offerings, oil and gas scams, and fraudulent initial coin offerings (ICOs). Regardless of the type of violation, investors can file a claim with SIPC or the Securities and Exchange Commission. These claims can result in restitution, payment to harmed investors, monetary penalties, or disgorgement of ill-gotten gains.
If you have been a victim of investment misconduct, acting quickly and consulting an experienced securities litigation attorney is essential. If FINRA or AAA arbitration or a civil action are your best options for recovery, a lawyer can assess your case and make that determination. Additionally, a lawyer can assist you with filing a claim with SIPC or the SEC. Finally, a lawyer can help you create a file of relevant documentation related to the incident. It is essential to keep all of your paperwork in a secure location, as impostors may try to steal your information.
