Stockbroker Arbitration: Investors should not be Ashamed of Losses

New York, NYWhen investors have been victimized by their stockbrokers, they are too often embarrassed to take any action, not realizing that they have avenues such as stockbroker arbitration to reclaim their losses. Rather than report the misdeeds of their stockbroker, they sit and do nothing.

Sounds like you? If so, know that you have nothing to be ashamed of. Many people have fallen victim to unscrupulous stockbrokers. Such stockbrokers are guilty of practices such as account churning, suitability violations, and negligence. In some cases the stockbrokers illegally make money off of their unsuspecting investors. In all cases, the investor loses money.

There are some signs that you can watch for that may signal fraud or negligence on the part of your broker. These include unauthorized transactions on your account; important information about an investment purchase being omitted; paying capital gains taxes even though your account value is decreasing, and your broker not returning your phone calls. Frequent trading on an account (known as churning) is another warning sign that your stockbroker is not acting in your best interests.

Furthermore, there are some rules regarding what stockbrokers can and cannot do. A stockbroker cannot make recommendations to a customer to buy or sell investments if that transaction is not suitable for a customer given the customer's age, investment objectives, investment experience and financial situation. A stockbroker cannot purchase or sell securities without first obtaining specific authorization for the transaction, except in situations in which the investor has given the broker written discretionary authority. Stockbrokers are also not allowed to charge investors excessive commissions on the sale of securities.

When a situation in which an investor loses money because of either careless mistakes (negligence) or intentional fraud (churning) arises, investors can use a process called arbitration to recover their losses. A panel of three arbitrators, including one who is either a stockbroker or member of the securities industry, usually oversees arbitration. Arbitration hearings are held at the district office of the NASD closest to the investor's residence and can take up to a few weeks. Awards are generally determined within 30 days.

Stockbrokers must treat their customers in a fair manner and place the interests of their customers before their own. If you have suffered losses because of either negligence or intentional misconduct on the part of your stockbroker, contact a lawyer to discuss your options. Do not let embarrassment prevent you from recovering your losses.