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Although stockbrokers and brokerage firms legally have an obligation to act in the best interests of their clients, unfortunately, that does not always happen. In a high-stakes financial situation, you could find yourself the victim of misconduct by your financial representative for any number of reasons, including:

  • Churning
  • Misappropriation
  • Unauthorized trading
  • Failure to diversify
  • Misrepresentations or omissions
  • General breaches of fiduciary duties

As an alternative to costly lawsuits in front of a judge and jury that could drag on for months or years and have substantial costs associated with them, many people choose to go through arbitration as an alternative dispute resolution process.

In a securities arbitration, a panel of impartial people will hear evidence from both sides and then reach a decision as to whether or not damages should be awarded. Arbitration is a relatively common way to resolve a securities dispute.

Before arbitration can take place, both sides must agree to go through the process as an alternative to litigation. Arbitrations fall under the control of the National Association of Securities Dealers because all brokers and brokerage firms should be members of NASD. It is also important to note that when you open up a brokerage account, chances are, buried in the fine print somewhere is an agreement that you will participate in arbitration as a means of settling a disagreement with your brokerage if something arises.

The good news for investors is that arbitration panels are generally comprised of financial professionals who are well versed in securities. Starting with a higher level of understanding means that a more informed decision can be reached quicker, with a final decision usually being rendered within 30 days of the arbitration hearing.

Raun Muntz O-Grady LLP serves clients in Los Angeles, Hollywood, West Los Angeles, Santa Monica, Beverly Hills, Anaheim, Orange County and communities throughout Southern California.

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