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May 12, 2015 by |

Understanding Securities and FINRA Arbitration


Arbitration is the most widely used form of conflict resolution in the securities industry, and the Financial Industry Regulatory Authority (FINRA) operates the largest dispute resolution forum in the industry. The customer is nearly always bound by a customer agreement to resolve disputes through arbitration.

San Francisco securities fraud lawyers say that arbitration is an increasingly complex process.

Common types of FINRA arbitration claims include:
-Unsuitability- This is when a customer alleges that the broker’s investment recommendations were not appropriate for the customer’s objectives, time horizon, risk tolerance, tax and financial status, age, and other factors.
-Unauthorized trading- This occurs when a broker makes trades without the customer’s knowledge or approval.
-Material misrepresentations or omissions- The broker fails to disclose a material fact about the investment, or intentionally provides misleading information.
-Breach of fiduciary duty- A customer alleges that the broker did not maintain the highest level of loyalty and fidelity.
-Negligence- A customer alleges that the broker failed to use diligence and act prudently.
-Failure to supervise- A customer alleges that the broker was not properly managed
-Churning- A customer alleges that a broker made unnecessary trades in order to gain commissions.
-Breach of contract- A customer alleges that the broker breached the customer agreement.
-Ponzi schemes- A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator.

According to San Francisco securities fraud lawyers, arbitration claims mainly focused on unsuitability of investment recommendations for many years. However, with a number of new and complex investments available, there have recently been a flood of cases regarding a brokerage firm’s failure to conduct due diligence on the products it is selling.

Evans Law Firm, Inc. handles securities fraud cases, including stockbroker fraud and other banking fraud lawsuits. If you have a securities fraud claim, please contact Evans Law Firm, Inc. at 415-441-8669 or via email at

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