Can I Sue My Stockbroker?
Well, yes and no. The question is more appropriately “How do I sue my stockbroker?” or “Where can I sue my stockbroker?” As I will explain shortly, the common denominator to all of these answers is that investors can (and should) seek recovery when their stockbroker breaches a duty owed to them and they suffer losses.
The short, but correct answer is “No,” you are likely prohibited from suing your brokerage firm in Court, and can only bring a claim in FINRA arbitration (which may look like a “Yes” answer…). All broker-dealers (think Merrill Lynch, Edward Jones, LPL, Wells Fargo, and any company that employs a stockbroker) must be registered with the Financial Industry Regulatory Authority (FINRA), the Self-Regulatory Organization that is vested with the regulation of brokers and the enforcement of rules governing the brokerage industry. All firms and their brokers are supposed to comply with FINRA’s rules and procedures, and these rules set forth many of the duties owed by the firm and the broker to the customer. When one or more of these rules are violated, a customer can be harmed and lose money (account losses) or be prohibited from making money (missed profits). One of these rules requires the broker-dealer to submit to a customer’s demand for arbitration using FINRA’s Dispute Resolution Forum–so even if there was no agreement to arbitrate, the customer could mandate that the firm submit to arbitration, but it is generally perceived that investors would prefer to be in a local court, before a local judge, and a jury of their peers.