By Santiago Rodriguez
Pace Law School, in association with FINRA, has updated its “Investors Guide to Securities Industry Disputes” in which they share tips and resources for preventing and resolving disputes with your broker. This guide is a helpful tool for investors who feel they may have a valid claim but are unaware of their rights and potential risks.
The guide is divided into three parts. The first part seeks to explain how to avoid disputes, elaborating on the investor’s rights and responsibilities. The second part addresses the arbitration process and what to expect if a dispute occurs. The third part shows alternatives to arbitration, such as mediation.
The first part of the guide offers 10 suggestions for responsible investing:
- Understand that all investments involve risks whether they are market risks, liquidity risks, or inflation risks.
- Research the broker and the brokerage firm before opening an account: ask whether the broker and the firm are properly registered with FINRA, verify the broker’s and the firm’s background, verify their professional credentials, verify that the broker is licensed by your state’s insurance commissioner, and verify that the firm is a member of the Securities Investor Protection Corporation.
- Formulate investment goals and communicate them clearly to you broker: have a clear sense of your investment goals and when you want them to happen, in order for the broker to make suitable investments.
- Learn about account features: some accounts offer features such as a pre-dispute arbitration clause, who has the authority to make decisions (whether the broker has discretionary authority over the account), or the ability to borrow from the firm;
- Learn about fees you may be charged for investment services and products: some brokers are compensated with commissions. Ask how your broker is compensated to avoid over-trading.
- Understand your investments and avoid any you don’t understand: only invest in products that are suitable for your risk tolerance;
- Carefully read all documents relating to your account and investments: be aware of any waiver you may be signing, and review all trade confirmations;
- Keep documents and note conversations with your broker: this will help keep a record of the relationship in case a dispute arises in the future;
- Report any problems with your account in writing immediately: this may help minimize losses and preserve legal rights;
- Ask questions.
By following these 10 steps, investors may stay ahead of potential risks and safeguard their investments from any potential issues that may arise. Follow the link at the top of this post for more information.