It’s common for investors to lose money on an investment. However, if you believe that broker negligence was the reason why your portfolio decreased in value, it may be worth considering legal action in the Washington courts. The type of action you’ll take depends on whether the broker is licensed by FINRA or regulated by the Securities and Exchange Commission (SEC).
Determining how the case will be resolved
If your broker is a person or entity regulated by FINRA, your case will typically be settled through arbitration, which takes place outside of court. In most cases, any ruling made by the arbiter is final and cannot be appealed. In the event that you’re dealing with an entity regulated by the SEC, your case will typically be dealt with in court.
Possible grounds for legal action
You may assert that your broker acted in violation of the Securities Exchange Act of 1934. For instance, you may claim that they engaged in excessive trading or traded in a manner that is inconsistent with industry norms. Excessive trading is usually easier to prove because it can really only happen if a broker has access to your money. If your portfolio contains land or commercial property, excessive buying or selling may form the basis of a real estate dispute against your investment representative.
Typically, claims against investment advisers usually result in the reversal of any transactions spurred by fraud or negligence. Alternatively, you may be entitled to compensation for any costs related to transactions involving brokers who acted in a fraudulent or negligent manner. Other damages may be available based on the specific facts in your case as well as applicable state or federal laws.