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Recovering Your Money
Your Legal Options | Arbitration | Mediation | Going to Court
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What To Do Now | Don't Delay | First Steps | Documents You Need
There are remedies for investors when financial advisors, investment managers or brokers mismanage the money entrusted to them. The remedies can work – if you have a properly qualified lawyer who is experienced in this field.
Our firm, Maddox Hargett & Caruso, P.C., includes a former State Securities Commissioner, Mark E. Maddox; a former broker, Thomas A. Hargett; and a former General Counsel to a national brokerage company, Steven B. Caruso. Maddox Hargett & Caruso, P.C. has the unique experience to represent investors who have been victims of stockbroker fraud by brokers, brokerage firms, and insurance companies.
Your Legal Options
If as an investor, you believe you may have been ill-advised, you'll want to first understand the legal options available to you in certain cases. The legal avenues available to wronged investors include arbitration, mediation and/or settlement in lieu of an arbitration hearing, and the relatively rare jury trial. These processes, and the role of a securities attorney acting on behalf of investors, are explained here. We also discuss the costs you could incur when pursuing a legal remedy, and what you can do now to begin finding the answers you need.
Option One: Arbitration
Arbitration is the most common method for resolving a case of securities fraud, for a variety of reasons. In many cases, investors are forced to use the arbitration process because they signed an “arbitration agreement” before doing business with the brokerage investment firm. To learn more about arbitration agreements, see “Did I Agree to Arbitrate?” in the right side bar.
Like all your legal options, arbitration has its pros and cons. Though it can take 12 to 18 months to resolve a case through arbitration, the process is considerably less time-consuming and less expensive than a lawsuit and courtroom trial. Also, unlike traditional litigation, arbitration takes place in private.
Arbitration awards are final and binding. Decisions made in arbitration are rarely subject to review by a court and when this does happen, the court usually upholds the arbitrators' ruling. Realize, too, that in choosing arbitration you generally give up your right to pursue the disputed matter through the courts.
How Arbitration Works
Arbitration begins when an attorney files a Statement of Claim. This is the investor's first chance to present evidence in the case, as the Statement of Claim gives an overview of events, and includes supporting documents and materials. The Statement of Claim provides the basic information arbitrators will need to understand the case.
Arbitration is the most common method of resolving securities misconduct.
Once a Statement of Claim has been filed, the discovery process begins. Attorneys for the claimant and for the respondent exchanges documents and information prior to the hearing. At some point during this process, the respondent may offer to settle the dispute out of the hearing room, or to engage in mediation. An experienced securities arbitration attorney can help you decide if accepting a settlement or entering mediation is right for you. (See “Critical Decisions.”)
If no independent settlement is reached, the investor's case is heard before an arbitration panel. An arbitration panel functions somewhat like a judge and jury, and is responsible for resolving the dispute. This panel provides a database of qualified arbitrators. The investor's attorney and the broker's attorney select the panel that will hear your case.
Just as in a court trial, attorneys may make opening and closing statements, present evidence and call witnesses. However, arbitration has more relaxed rules than a court proceeding. For example, arbitrators often question witnesses themselves - something a jury can't do.
Types of Arbitration Awards or Damages
The most common type of damages awarded in securities arbitration hearings are “out-of-pocket damages” - typically, the amount of money the investor lost on the bad investment. Arbitrators also may award blue sky statutory damages or consequential damages, which includes lost profits, taxes or expenses incurred. Finally, if arbitrators award recessionary damages, the investor returns the security in question and gets his or her money back.
“It can be tempting to settle cases too easily and cheaply, and not fight the fight. We try hard to strike an appropriate balance.” Mark Maddox
Option Two: Mediation And Settlements In Lieu Of Arbitration
Approximately 70% of all disputes filed settle before they reach an arbitration hearing. And in the vast majority of these settlements, the investor recoups some or all losses. Settlements between the two parties may be reached independently, or with the help of a mediator. After a settlement is reached, it is finalized when both parties sign a document pledging to meet the terms of their mutual agreement.
Mediations are really just supercharged negotiations. Either side can walk away from the proceedings at any time. If one of the parties is not happy with the end result of the mediation, there is no obligation to accept the final negotiated settlement. This is in contrast to decisions made by an arbitration panel, which may be final and binding.
For the right cases, mediation is an extremely attractive option. In many cases, the investor in an arbitration action has lost a significant amount or all of his or her life savings. Going to arbitration and allowing three arbitrators to decide one's fate can be an unattractive option for some, because the outcome is so uncertain. Mediation gives the investor some control over the outcome - as long as he or she is willing to negotiate.
In mediation, an impartial person, called a mediator, assists the parties in reaching their own solution.
Option Three: Going To Court
Investors who did not sign an agreement to arbitrate may wish to explore other legal options. You may choose to file an individual lawsuit, and pursue the matter in state or federal court. Or in certain cases, you and your attorney may find it appropriate to pursue a class action lawsuit. A class action is a lawsuit filed by a large group of investors who have suffered a common wrong.
Bringing your dispute to court has its advantages. A jury of your peers may be somewhat more sympathetic to your case. Your attorney can engage in more extensive fact-finding procedures. And, the judge may encourage both parties to reach a satisfactory settlement. The downside is that jury trials use up considerably more time and money.
The attorneys at Maddox Hargett & Caruso, P.C. are experienced in all forms of investor dispute resolution. We have recovered losses for clients through independent settlements, mediation, jury trials and class action lawsuits. To learn whether your dispute is best pursued through the judicial process or through arbitration or mediation, simply contact us at Maddox Hargett & Caruso and ask for a free consultation with an attorney. We can reliably analyze your investment loss, and recommend the best way to proceed.
Reach us at 800-505-5515, or email us.
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Think Back
Did I agree to arbitrate?
If you dealt with a major brokerage firm, you most likely did. Most large investment firms require all customers to sign what's called an “arbitration agreement” before doing business. While there is no one universally accepted arbitration agreement, most read something like this:
“I agree that all controversies that may arise between us concerning any order or transaction, or the continuation, performance or breach of this or any other agreement between us, shall be determined by arbitration before a panel of arbitrators selected by the Financial Industry Regulatory Authority (FINRA), as I may designate, pursuant to the rules of the organization in existence at the time of the submission to arbitration. I understand that a judgment upon the arbitration award may be entered in any court of competent jurisdiction.”
Reality Check
Curb your optimism: Arbitration awards for full damages are few and far between.
The arbitration awards you see in headlines are the record breakers. But be aware: while many claimants in arbitrated disputes recover some of their losses, very few investors receive full compensation in this way. The reasons and rationale for the arbitrators' decisions vary. Patterns and precedent are not consistent in this area of law. Therefore, outcomes cannot be reliably predicted by attorneys for either party. Our attorneys counsel aggrieved investors to manage their expectations about upcoming arbitration. As Mr. Maddox has said, “It's no coincidence that the words arbitrary and arbitration have the same root.”
