1. How do I know if I have a good case?

First and foremost you need to have suffered losses. When determining losses you must account for money you have withdrawn from the account and exclude those from your calculations. In only rare circumstances will a broker or firm be held accountable for money you took out and/or spent.

Next, you need to distinguish bad luck from bad acts. Brokers are not foretellers of the future with regard to how the markets will perform, nor will they be held to that standard by a trier of fact. However, there are certain rules of conduct or standards relative to handling your account and/or making recommendations that they must follow, and may be liable for losses for violating those rules or standards. It usually takes someone trained in these rules and experienced in knowing what is an actionable cause of action to make the determination of whether or not you have a case that will likely result in a recovery.

2. Will I be in court?

In all likelihood, no. Every brokerage firm in the United States has an arbitration clause embedded in its account application. The clause says that if you have a dispute you must submit to binding arbitration run by the Financial Industry Regulatory Authority (FINRA). If you have a claim against a financial advisor not affiliated with a FINRA member firm, they will usually have a clause saying that you must submit to binding arbitration through another entity, such as the American Arbitration Association (AAA).

Only if your claim is not eligible for arbitration will you find yourself in court.

3. What does it cost to bring a claim?

There are several costs associated with bringing a claim. The first is the filing fee. This is the fee charged by the forum where your case will be heard. In the case of FINRA, which runs the forum for all cases brought against stockbrokers and their firms, the fee is a sliding scale, based on the amount in controversy. The fee can range anywhere from $50.00 for claims under $1,000.00, up to $1,800.00 for cases claiming over $1,000,000.00 in damages.

If you retain an attorney, you must factor that cost in as well. Most attorneys that practice extensively in this area will take cases on a contingency fee basis. This means they will be paid a percentage of any money you recover. If you do not recover anything, they will not earn their fee.

You may also have additional costs to have a damage analysis prepared, to have an expert witness testify on your behalf at the hearing as well as the fees associated with the hearing itself. There are incidental costs for postage, copying, fed-ex, etc. as well.

There are some attorneys, depending on the facts of the case, that will front or cover some or all of these expenses.

4. Do I need to hire an attorney?

No, but in almost all cases you will be going against a firm and/or broker that will have retained an attorney, and most likely an attorney that is well versed in this particular area of the law.

5. How long is this process?

The arbitration process usually runs 10 – 16 months from start to finish.

6. Can I recover my costs and attorneys fees?

It is possible, but not commonplace to have a panel award you some or all of your costs and fees.