What is a security?
Generally it is something that people invest in where they take no active part, such as a stock, bond, promissory note, or limited partnership interest. This is not a complete list but it covers most of the securities transactions done on a day to day basis.
Isn't the securities industry regulated?
Yes. The three primary functionaries are the Securities and Exchange Commission, ("SEC") the state's securities commission, and the National Association of Securities Dealers ("NASD").
What does this regulation mean to me if I have lost money?
It may not mean much. Many people, and some attorneys who are not familiar with securities law and the securities agencies' function, will complain to them and then sit back, hoping that the agencies will get their money back. Unfortunately, this strategy is not effective and wastes precious time. Recovering investors' money is not their role. Typically, they seek so-called administrative sanctions: this means impose a fine, suspend or revoke a license, or obtain a cease and desist order against future actions.
How can I get my money back?
In most cases, the only way is to retain an attorney who is knowledgeable in the area of securities law who also possesses trial skills and experience, and file an action and try the case if necessary. Often it can and will be settled before it has to be litigated. The best way to make this happen is to prepare the case as if it is going to trial, and in that way deal from a position of strength.
What if my broker is broke or my investment advisor has no assets?
There often are ways to hold liable the company with whom he or she is affiliated. That company is ordinarily a broker-dealer licensed by the state securities commission that has insurance coverage for these kinds of claims. This is key in that it is usually the only way to recover, since the primary wrongdoer never seems to have sufficient money or other assets to collect against.
What is the NASD and what does it do?
It is a so-called "self-regulatory organization" or SRO consisting of various broker-dealers throughout the country. Many think that its primary function is to protect themselves - not the investor. To the extent it does policing of its members, it will issue fines, suspensions and enter into cease and desist agreements.
Another of its functions is that it holds arbitration hearings to resolve investors' claims against its members and their affiliates.
Why aren't these investor claims handled by the courts?
In the usual case the customer/investor signed an "arbitration agreement" which is typically a part of the initial account agreement, providing that the customer must arbitrate any dispute, giving up his or her right to go to court.
Who decides these cases?
When there is a significant dollar amount involved, there is an arbitration panel of three people, one of whom is associated with the "industry." These people are drawn from a list of individuals who have agreed to be arbitrators, with each side to the controversy having the right to strike proposed panel members.
How long does it take to get a case finished?
Usually the case can be done within about a year, and sometimes sooner than that. The arbitration process in many ways has taken on attributes of a court case, with its own procedures, discovery process, and pre-hearing matters, and the fairly formalized way the arguments and evidence are presented in the arbitration hearing itself.
Can cases be handled on a percentage basis?
Yes, and there is no charge for the initial consultation.
