Investor Resource
How to Recover Investment Losses
If your broker caused your losses through negligence or misconduct, you may be able to recover through FINRA arbitration.
Not All Losses Are Recoverable — But Many Are
Investment losses fall into two categories: those caused by market forces and those caused by broker misconduct. You cannot recover losses simply because the market went down. But if your broker recommended investments that were unsuitable for your situation, misrepresented risks, executed unauthorized trades, or churned your account, you may be entitled to recover those losses through FINRA arbitration. The legal standard is whether the broker breached a duty of care — not whether the investment was ultimately unprofitable.
How FINRA Arbitration Works
FINRA (the Financial Industry Regulatory Authority) operates the largest securities dispute resolution forum in the United States. Once you file a claim, FINRA assigns a panel of arbitrators — typically one or three, depending on the size of the claim. Both sides present evidence and witnesses. The panel deliberates and issues a binding award, which can include the return of your principal losses, interest, attorney fees, and in egregious cases, punitive damages. Awards are enforceable in federal court.
Steps to Take Right Now
If you suspect your broker has mishandled your account, act immediately. First, gather all account statements, trade confirmations, correspondence, and any documents you signed when opening the account. Second, do not make additional trades or close accounts without consulting an attorney — this can affect your damages. Third, contact a securities attorney for a free consultation. Most will review your account history and give you an honest assessment of whether you have a viable claim. There is no cost to you unless you recover.
Frequently Asked Questions
What damages can I recover in FINRA arbitration?
You can typically recover out-of-pocket losses (the difference between what you invested and what you got back), interest on those losses, and attorney fees if the panel finds the broker acted egregiously. In cases of fraud or willful misconduct, punitive damages are also possible, though less common.
What if my brokerage firm has gone out of business?
If your brokerage firm is SIPC-insured (most are), the Securities Investor Protection Corporation can protect up to $500,000 of your assets ($250,000 cash) in the event of firm failure. For fraud-based losses, you may still have claims against individual brokers or successor firms. A securities attorney can help trace liability.
How do I find a good securities attorney?
Look for attorneys with specific FINRA arbitration experience — not just general litigation. PIABA (Public Investors Advocate Bar Association) is the leading organization for investor-side securities attorneys. All attorneys in The Diogenes Group directory specialize in securities disputes and offer free consultations.
Attorneys Who Handle These Cases
These attorneys have experience with how to recover investment losses matters.