FINRA complaint vs. FINRA arbitration claim
| Item | FINRA investor complaint | FINRA arbitration claim |
|---|---|---|
| Purpose | Alert FINRA to possible rule violations | Recover money damages |
| Cost | Free | Filing fee based on amount claimed |
| Outcome | Possible discipline of the firm or broker | Award of damages, if successful |
| Lawyer needed? | No | Not required, but strongly advisable |
| Where | Investor Complaint Center | FINRA Dispute Resolution Portal |
When FINRA arbitration applies to pre-IPO losses
FINRA's jurisdiction covers member brokerage firms and people registered with them. Many pre-IPO boiler rooms aren't FINRA members. But a claim may still be possible if:
- A registered broker sold or recommended the pre-IPO investment, even outside their firm ("selling away"), and the firm failed to supervise them.
- A brokerage firm acted as placement agent for the offering.
- Your brokerage firm recommended the investment or the platform that sold it.
Customers can generally require a FINRA member to arbitrate disputes arising from the business of the firm or its associated persons (FINRA Rule 12200).
How to file a securities fraud arbitration claim with FINRA
- Statement of Claim: you or your attorney describe the facts, the claims, and the damages sought, and file through the FINRA Dispute Resolution Portal with the filing fee.
- Answer: the firm and individuals named respond.
- Arbitrator selection: the parties rank and strike arbitrators from lists FINRA provides. Larger claims generally get a three-arbitrator panel; small claims may be decided on the papers.
- Discovery: the parties exchange documents.
- Hearing: witnesses testify and the panel issues a written award. Most cases settle before a hearing; FINRA also offers mediation.
Deadline
FINRA Rule 12206 generally makes claims ineligible for arbitration more than six years after the event that gave rise to them. Shorter legal limitations periods may also apply. See the statute of limitations.
Broker investment fraud claims: common grounds
- Misrepresentation and omission
- Unsuitable recommendations and Regulation Best Interest violations
- Failure to supervise (including selling away)
- Breach of fiduciary duty
- Unauthorized trading