Feeling ripped off? How to resolve disputes with a broker or financial advisor

When you invest, you must take on some risk, against which no law or regulation can provide protection.

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When you invest, you must take on some risk, against which no law or regulation can provide protection.

When you invest, you have the following rights (according to the Financial Industry Regulatory Authority):

  • To ask for and receive information from a firm about the work history and background of the person handling your account, as well as information about the firm itself.
  • To receive complete information about the risks, obligations and costs of any investment before investing.
  • To receive recommendations consistent with your financial needs and investment objectives.
  • To receive a copy of all completed account forms and agreements.
  • To receive account statements that are accurate and understandable.
  • To understand the terms and conditions of transactions you undertake.
  • To access your funds in a timely manner and receive information about restrictions or limitations on access.
  • To discuss account problems with the branch manager or compliance department of the firm and to receive prompt attention and fair consideration of your concerns.
  • To receive complete information about commissions, sales charges, maintenance or service charges, transaction or redemption fees, and penalties.
  • To contact your state or provincial securities agency for any the following reasons: to verify the employment and disciplinary history of a securities salesperson and the salesperson’s firm, to find out if an investment is permitted to be sold and to file complaints.

An important point is that simply losing money on an investment doesn’t mean you can sue your advisor for bad advice. Remember, nowhere in the Bill of Rights does it say that investors are guaranteed a return. Markets are risky by nature. When you invest, you must take on some risk, against which no law or regulation can provide protection. You should file a complaint only if you believe you’ve been defrauded — simply losing money isn’t enough.

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According to FINRA, the most common complaints against brokers and advisors are misrepresentation and unsuitability:

  • Misrepresentation — falsehood or omission of facts in relation to an investment. This is a classic case of a client believing he or she was told one thing and then finds out after the fact that what he or she understood to be true was not the case.
  • Unsuitability — when a financial advisor or broker invests a client’s money in a security that is not suitable for the customer’s investment objectives. An example of this is an advisor investing large sums of money in high-risk securities for a person who is 75 years of age and has a low risk tolerance.

If you think that you have a legitimate dispute with your broker or advisor, there are a couple steps you can take. If your complaint is against a stockbroker, you need to file a dispute with either the Securities and Exchange Commission or FINRA.

Many financial professionals are members of a charter organization (you can usually tell by the acronyms after their name.) These organizations also have standards and codes of ethics, so it’s worth lodging a complaint with them, as well. For example, if your complaint is against a certified financial planner, you can file with the Certified Financial Planner Board of Standards. If it is against a chartered financial analyst, you can contact the Association of Investment and Research.

Contacting your state or provincial securities commission is another avenue to take. Each state or province has a division that handles complaints against brokers, advisors and financial planners.

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