Most investor claims are decided in FINRA arbitration. Some belong in court — and knowing the difference can determine whether you recover anything at all.
When people lose money on an investment, they usually assume the only way forward is a courtroom. In practice, the opposite is closer to the truth: most disputes between investors and their brokers are resolved through FINRA arbitration, because the account paperwork required it years before anything went wrong.
But not every claim fits that path. Sometimes the person who handled your money never answered to FINRA at all. Sometimes there was no account, and no paperwork. Sometimes the people who made the loss possible are a bank, a sponsor, or a firm you never met. In those situations, court is where the claim belongs — and in some of them, court is the only place it can be heard.
This page explains when that happens, what the process looks like, and how we decide which path fits your situation.
Nearly every brokerage account agreement includes a clause requiring that disputes be resolved through arbitration before FINRA, the organization that regulates brokerage firms. Most investors sign one without noticing. Courts have upheld these clauses for decades, so if your losses involve a registered broker at a brokerage firm, arbitration is almost certainly your path.
You can read what that process looks like on our FINRA arbitration page.
The question that determines your path is not which process you would prefer. It is a different question entirely: who took your money, and were they a FINRA member?
If the answer is no, FINRA has no authority over them — and arbitration may not be available to you even if you wanted it.
These are the situations where court is typically the right forum, or the only one.
The person who advised you was not a registered broker. Registered investment advisers, financial planners, insurance agents, and wealth managers are often regulated by the SEC or a state securities division rather than by FINRA. There are roughly three thousand FINRA member firms and more than twenty thousand registered investment advisers, and that gap has been widening for years. When an adviser is not a FINRA member, court is generally the forum for a claim against them.
You never signed a brokerage agreement. If you wrote a check directly to someone, wired money to an entity, or invested in something that never appeared on a brokerage statement, there may be no arbitration clause at all. Without an agreement to arbitrate, no one can force your claim into arbitration.
Your losses involve an issuer, sponsor, or fund rather than a brokerage firm. Private placements, real estate offerings, promissory notes, unregistered offerings, and investment funds are frequently sold by entities that are outside FINRA’s reach.
Other parties helped make the loss possible. Banks that processed the transfers, accountants who signed off on the numbers, custodians who held the assets, or professionals who lent credibility to the arrangement can sometimes be pursued — but not in FINRA arbitration.
A large group of investors was harmed the same way. FINRA arbitration does not accept class actions. When many people were affected by the same conduct, court may be the only place to address it collectively.
Assets are being gathered through a receivership. When a fraud collapses and a court appoints a receiver to recover and distribute assets, that process runs through the court system. ChapmanAlbin has served as receivership counsel in matters of this kind.
Your claim rests on a securities statute rather than on broker conduct. State and federal securities laws create rights that can be enforced in court against parties who never held a FINRA registration.
Many investors have losses that fall into more than one category, or that involve both a brokerage firm and a party outside FINRA’s reach. In those cases, both paths may be pursued at the same time. Sorting that out is our job, not yours.
Neither forum is better than the other in every case. They are different tools, and the right one depends on who you are pursuing and what happened.
Who decides. In arbitration, one or three arbitrators hear the case and act as judge and jury. In court, a judge presides and a jury may decide the outcome.
Who you can pursue. Arbitration reaches FINRA member firms and the brokers registered with them. Court reaches everyone else — advisers, sponsors, issuers, banks, and professionals.
How evidence is gathered. Arbitration relies mostly on document exchange, and depositions are generally not permitted. Court allows full discovery, including sworn testimony from witnesses before trial and the use of expert analysis. In a complicated fraud, that difference can matter a great deal.
How long it takes. FINRA cases often resolve in roughly a year to a year and a half. Court cases commonly take longer, sometimes considerably longer.
Whether it is private. Arbitration proceedings are confidential. Court filings are public record.
Whether it can be appealed. An arbitration award is final, and overturning one is rare and difficult. A court judgment carries full appeal rights for both sides.
We will walk you through how these tradeoffs apply to your specific situation before any decision is made.
Investors have real rights, and they come from several places at once.
Federal securities laws prohibit fraud and misrepresentation in the sale of investments, and they allow investors who were deceived to pursue the parties responsible.
State securities laws, often called blue sky laws, provide additional protections. Under Ohio law, for example, an investor who bought securities in an unlawful sale may have the right to unwind the transaction and recover what was invested — a remedy that reaches not only the seller but, in some circumstances, parties who participated in the sale.
Long-standing legal principles also apply: fraud, breach of fiduciary duty, negligence, and breach of contract. These often accompany a securities claim rather than standing alone.
You do not need to know which of these fits your situation. That is what the consultation is for.
This is one of the most important differences, and one of the most commonly misunderstood.
FINRA has a six-year eligibility rule that limits how far back an arbitration claim can reach. That rule is not a statute of limitations, and it is not the same clock that applies in court. Court deadlines are set by federal and state statutes, and many of them are measured from the point at which an investor discovered — or reasonably should have discovered — that something was wrong.
The practical consequence is this: investors are sometimes told their claim is too old when a viable path still exists, and other times a deadline is closer than they realize. The clocks are genuinely different, and they do not always run the same direction.
If you are wondering whether too much time has passed, that question is worth asking us rather than assuming the answer. The sooner you reach out, the more options are likely to be available to you.
Learn more about deadlines and eligibility
If you trusted someone to look out for your money, the question the law asks is whether that person did their job — not whether you should have known better. Tell us what happened, and we will tell you honestly whether we think you have a case and where it belongs.
Step 1.
Talk to an Experienced Attorney Today
Call and speak to one of our attorneys* for a no-cost consultation to discuss your situation, answer your questions, and help you determine the next steps. This call usually takes about 15 minutes, but we are happy to talk to you as long as you would like!
Step 2.
Quick Review of Your Paperwork
If we think you might have a case, we will need to review a few basic documents. If we determine you have a case, then you will have the option to hire us as your attorneys to pursue it.
Step 3.
Signed Attorney/Client Agreement
If you decide to hire us to pursue your case, we will have you sign an attorney-client agreement so we can begin the process of trying to recover your losses.*
*In the vast majority of cases, our agreement is contingent – meaning you won’t owe us any money unless we recover money for you.
