6.   Filing a Complaint

If you suspect that you’ve been the victim of securities fraud or deception, you have several places to turn at both the state and federal level.

If you’re planning to file a complaint, it’s smart to have all your supporting information prepared ahead of time because you’ll need to provide it to the authorities. You should also be ready to provide your own contact information—name, address, phone number, email address, and so on—as well as that of your broker and brokerage firm, or any individual you plan to name in your complaint. In addition, you should pull together the specific details of how you were defrauded or misadvised, including what you were told about an investment or any documentation you received. And, of course, you need to disclose how much money you lost to the fraud or scam.

When you file a fraud complaint, authorities may decide to pursue criminal charges or launch an investigation against a scammer or illegitimate broker. In this case, you may be called upon to testify or lend your version of what happened.

Where to Go 

Usually, it’s best to initiate your complaint by getting in touch with your investment professional or, if necessary, his or her supervisor.  You can also send your complaint in writing to the firm’s compliance office.

If reaching out to your brokerage firm doesn’t produce results, you can send a complaint to the Financial Industry Regulatory Authority (FINRA), the self-regulatory organization that oversees brokerage firms, brokers, and securities traders. FINRA investigates complaints against brokerage firms and their employees and can take disciplinary action.  You can file a complaint online by visiting the FINRA Complaint Center at www.finra.org/complaint, or you can fax or send a written complaint to:

FINRA Investor Complaint Center

9509 Key West Avenue

Rockville, MD 20850

Fax: (866) 397-3290

If your complaint involves an investment adviser, transfer agent, mutual fund, or public company, you may want to file your complaint with the Securities and Exchange Commission (SEC) or with your state securities regulator. You can also submit a complaint about a broker. To contact the SEC’s Office of Investor Education and Advocacy, call toll-free (800) SEC-0330 or visit the SEC’s online Complaint Center at www.sec.gov/complaint.shtml. To contact your state securities regulator, check the government section of your local telephone book or contact the North American Securities Administrators Association (NASAA) by visiting www.nasaa.org or calling (202) 737-0900.

Arbitration and Mediation 

When you file a complaint, bear in mind that neither FINRA nor the SEC nor your state regulator can act as your personal attorney.  If your primary goal in filing a complaint is to get your money or securities back, you might need to take matters into your own hands, either through the courts or by considering arbitration or mediation. 

When you opened your brokerage account, you likely signed an account agreement requiring that you resolve any disputes with your broker or the firm through arbitration. FINRA administers the largest forum in the U.S. for resolving disputes between brokers and investors.  The first step in filing for arbitration or mediation is to visit the “Arbitration and Mediation” section of FINRA’s website at www.finra.org.

With arbitration, your case goes to an individual arbitrator or a panel of arbitrators that is assembled to decide the outcome. Many people hire an attorney to help them with an arbitration case because the brokerage firm will almost certainly have legal representation. In addition, an arbitration decision is binding, which means you cannot appeal or take the case to court. In some cases, you may be present at the arbitration. However, if your loss is less than $25,000, you can choose not to appear before an arbitration panel. Instead, you can request that the panel use a method called simplified arbitration and base its ruling on documents and on written explanations from you and your broker. FINRA’s website provides links to law schools in several states that provide guidance to investors free of charge through arbitration clinics.

With mediation, you, your brokerage firm, and a neutral third party try to resolve the case. This method of working out a dispute is usually less costly and less confrontational than other ways, but it’s also voluntary and nonbinding. That means that at any point one participant can walk away, effectively ending the negotiation. In addition, you and the firm must agree to the terms of a settlement before it becomes final.

For more information about arbitration and mediation, go to FINRA’s website at www.finra.org/arbitration_mediation.