What kind of remedies are available to investors who win FINRA arbitrations?

Securities arbitration lawyer Robert W. Pearce, a Florida based securities lawyer with a practice that is primarily representing investors in FINRA arbitrations against broker dealers and advisors, answers one of the more frequently asked questions: What kind of remedies are available to investors who win FINRA arbitrations?

Video Transcript

My name is Robert Pearce. There is no limitation on the type of remedy that an arbitrator can award in the FINRA arbitration. They can award the remedy of rescission, of compensatory damages, of punitive damages. They can order the stockbrokers to pay your attorney’s fees, pay you interest from the time that you liquidated your damages. They can order pre- and post-judgment interest. They can order lost profits. They can order the stockbrokers to pay all of your litigation expenses, the FINRA arbitration fees, the expert witness fees, the travel expenses that you may have incurred, transcript fees. There are all sorts of remedies. There are no limitations on arbitrators and what they may award.

Now, the common measurement of compensatory damages is known as the net out-of-pocket losses measure of damages. And what that is, is the difference that you might pay for a security, less what you might have sold it for, or what it’s worth at the time you bring this lawsuit or have the arbitration hearing, less the income received in the form of interest or dividends. That is the general measure of damages.

However, that is not always the appropriate remedy, and you need a skilled FINRA securities arbitration attorney to argue for the appropriate remedy.

You want to be made whole for the wrong committed, and sometimes the wrong committed warrants the award of the investment capital loss, without regard to any dividends or interest. Sometimes that’s called the benefit of bargain measure of damages. When a broker misrepresents a particular investment as producing a particular return, giving you back all your investment capital plus say 6%. An arbitrator could order that, indeed, you are entitled to all your money back plus that fixed interest or dividend that was promised to you. We see this measurement of damages being awarded most often in the Puerto Rico cases that we are handling.

There is the well managed account measure, or the market adjusted measure of damages. And what that is, if your stockbroker had managed your account appropriately, and managed it the way you told him you wanted him to manage it, consistent with your investment objectives, your risk tolerance, and your financial condition, what would that account have produced, measured against what it actually produced? Most often we use an index, like the S&P 500, or the Barclays Capital fixed income index, or a mutual fund, like a Vanguard Total Bond Fund, or Vanguard Total Stock Index to measure how that portfolio would have performed had it been invested in that hypothetical portfolio, against how it actually performed as the market adjusted measure of damages?

There are other measures of damages generally awarded. You can get an Award of Rescission, which is the price that you pay for a particular security with interest, less the income received, or the dividends received, and exchange you return the investment that was recommended that was the subject of the stockbroker misconduct.

Again, you can get your attorney’s fees, you can get interest, you can get lost profits, if you have the right attorney representing you. And you need a skilled, experienced FINRA securities arbitration attorney to maximize the remedies and the damages that you are awarded.