This week FINRA published a Recovery Checklist for Victims of Investment Fraud and at the risk of being called sensitive, it seems the Checklist seemed to omit, at least on its face, that hiring an attorney may be the most direct route to seeking any compensation that may be due from being a victim of a financial crime or a victim of investment fraud. Granted, if you click through to the embedded links, you will find another page published by FINRA titled “Legitimate Avenues for Recovering Investment Losses.” Therein you will find FINRA’s suggestion that “…You may want to hire an attorney to represent you during the arbitration or mediation proceedings to provide direction and advice.” I guess it is nice to be considered a “legitimate” avenue by FINRA, as any suggestion of illegitimacy would not sound quite as nice.
But back to the “Checklist.” FINRA provided a number of resources to report the crime, and victims of investment fraud and financial crimes should report these crimes to all appropriate agencies, as those agencies represent the only real process that can (whether they will is a different issue) bring criminal or regulatory charges against the perpetrator. However, it is in my experience rare that the authorities responsible for enforcing the criminal and regulatory statutes will recover the victim’s damages, although it certainly happens from time to time. That is not their real responsibility–they want to enforce the criminal laws and regulations and put deserving criminals behind bars or revoke licenses. Yes, recovery will sometimes be the product of criminal enforcement, but hiring someone that has no purpose other than representing the victim in seeking the appropriate recovery is wise.
I am glad FINRA acknowledges that the damage done by investment fraud not only includes the damages from financial loss, but also includes “…at least one severe emotional consequence—including stress, anxiety, insomnia, and depression.” These damages are real, and should be recoverable in arbitration, right? Well, FINRA knows that it is not easy to recover from investment fraud, and states so plainly. FINRA states, “While full financial recovery may be difficult to achieve…” and again states “It can be difficult to recover assets lost to fraud or other scenarios in which an investor has experienced a problem with an investment. But there are legitimate ways to attempt recovery. In most cases, you can do so on your own—at little or no cost.” Alas, is this a comment on the fairness/difficulty in recovering legitimate damages in its own arbitration forum? Perhaps, but don’t expect FINRA to connect these dots. But given this admitted “difficulty”, why does FINRA seemingly encourage victims of investment fraud to go it alone? FINRA is certainly aware of what can happen to the investor/claimant/victim proceeding on their own against veteran Wall Street attorneys in its FINRA arbitration forum—something akin to throwing raw meat into a crowded lions’ den comes to mind. Granted, experienced FINRA arbitrators will recognize a meritorious claim before them, but when it comes to recovering money from investment fraud, don’t go it alone!