When things do go wrong between you and your broker, what do you do? Your first step is to try to resolve things directly with the broker and his or her firm. Most problems are solved this way. But if that doesn’t work, you may be able to find a solution through mediation or binding arbitration.
The Financial Industry Regulatory Authority (FINRA) recommends first trying to resolve the dispute through mediation — an informal and non-binding process in which a neutral mediator leads discussions with you and the other party to craft a solution that works for both sides. This process is much more likely to preserve relationships, and it costs less than arbitration. But remember that both parties must agree to take this step.
In contrast, arbitration is a formal process, in which experienced, neutral, third-party arbitrators review your case, determine the outcome, and set the amount of any award. Unlike mediation, the outcome of arbitration is binding, so both parties must abide by the arbitrators’ decision.
1.
Discuss the problem with your broker. If your complaint isn’t handled promptly, write to your broker’s manager and the firm’s compliance department, providing a detailed account of the problem.
2.
Keep track of all correspondence and conversations to show what steps you took to resolve the problem.
3.
If you can’t resolve the problem with the firm, contact your state’s securities division, the SEC for registered investment advisers, and FINRA for brokers.
4.
FINRA recommends mediation as a first step toward resolution, and handles most mediation cases.
5.
Arbitration is generally the final step. Several organizations offer arbitration services, including FINRA.
Arbitration/mediation clinics
If your claim is small or you can’t afford to hire a lawyer,
you may qualify for legal representation through a legal clinic specializing
in arbitration and mediation. The clinics are run by law schools in
California, New York, and Pennsylvania — although investors
who live outside those states may be able to receive more limited
assistance, such as general advice about their claims or how to file
a complaint. For contact information and to learn more about the program,
visit the SEC Web site: http://www.sec.gov/
answers/arbclin.htm
