Investors Use Stockbroker Arbitration to Recover Lost Funds

Austin, TXMore and more investors are learning that, if their stockbroker acts inappropriately in giving investment advice, they can turn to stockbroker arbitration to regain their lost money. In fact, many investors have a clause in their paperwork that requires them to use stockbroker arbitration to settle investment claims.

One claim was recently filed in Texas after an investor instructed his stockbroker to put his $2 million in a safe and liquid security. The money was put into an auction rate security, which is actually a seven-day bond. Unfortunately, the auction rate securities market collapsed and those with money invested in it are left wondering how much their investment is worth.

The situation is serious enough that New York Attorney General Andrew Cuomo has reportedly become involved, investigating allegations of fraud in auction rate securities sales. The North American Securities Administrators Association is also looking into the matter.

Initially, investors involved in auction rate securities tried to sue their brokerage firm, only to learn that they had to settle the matter through arbitration. However, fraud laws are applicable in arbitration hearings, so the investors may still have a strong claim against their stockbroker.

More people are counting on their investments to ensure they are financially stable during retirement. Unfortunately, this means that there are many people investing who may not understand the complexities of the stock market. Unethical stockbrokers can use an investor's lack of knowledge to conduct inappropriate transactions on an account, such as churning the account to increase commissions. Of course, most people do not realize that anything is wrong until their investment has lost most, if not all, of its value.

Not all stockbroker errors are the result of unscrupulous brokers. In some cases, the stockbroker has simply made an error in judgment or missed a warning sign about a certain investment. However, investors pay stockbrokers a lot of money to ensure that mistakes do not happen and large amounts of money are not lost needlessly. It is the stockbroker's job to ensure that the client's best interests dictate how money is invested at all times.

When stockbrokers invest money improperly or conduct inappropriate transactions on an account, the investor can turn to stockbroker arbitration to regain some, or all, of the lost money. However, stockbroker arbitration can be a long and complex process. A lawyer who is experienced with stockbroker claims can make sure that investors receive the compensation they are entitled to.

If you lost money due to the unethical actions of a stockbroker, contact a lawyer to discuss your legal options.