Pursuing a Claim
When opening a brokerage account, brokerage firms routinely require new clients to complete a New Account Form. The form requests information such as name and address, as well as financial data concerning your income, net worth, previous investment experience, and investment objectives. Contained in these forms is an arbitration agreement whereby the customer agrees that any dispute regarding the account will be submitted to arbitration, usually through one of the arbitration programs operated by the securities industry. There is heated debate as to whether these industry run arbitration programs are fair to the investor. However, clients are usually bound by these arbitration clauses, and must use one of the programs to pursue a claim against their broker or brokerage firm.
The Financial Industry Regulatory Authority (“FINRA”) was formed as a result of the merger of the regulatory divisions of the National Association of Securities Dealers and the New York Stock Exchange. FINRA provides a dispute resolution program in which aggrieved investors may pursue claims against brokers and brokerage firms. In addition to FINRA Dispute Resolution, various other stock exchanges including the American Stock Exchange and the Pacific Stock Exchange operate arbitration programs. FINRA’s Dispute Resolution forum is the mostly commonly used program, but they all operate along the same general guidelines.