How to File a Complaint Against a Financial Advisor

If you believe your financial advisor has committed wrongdoing, taking swift action is important to prevent further harm and ensure justice is served. Filing a complaint against a financial advisor is crucial in protecting your investments and holding advisors accountable for their actions, but it can be complex. 

We’ve compiled this step-by-step guide to help you better understand the process necessary for filing a complaint against a financial advisor. We also cover everything you need to know about the Financial Industry Regulatory Authority (FINRA), the regulatory body that oversees financial advisors in the United States.

Understanding the Basics of Filing a Complaint 

The FINRA is a non-governmental organization that regulates member brokerage firms and exchange markets. The FINRA’s primary role is to protect investors by ensuring that the broker-dealer industry operates fairly and honestly. The FINRA aims to maintain market integrity and investor confidence by monitoring the financial activities of advisors and firms. Compliance with FINRA regulations is mandatory for all registered financial advisors and firms, making the FINRA a key player in safeguarding financial markets.

Reasons to File a Complaint 

Investors may find it necessary to file a complaint against a financial advisor for various reasons, including fraud, unauthorized trading and excessive fees. Fraud involves deceptive practices that mislead investors, resulting in decisions that benefit the advisor at the investor’s expense. Unauthorized trading occurs when an advisor trades without the investor’s consent, potentially leading to significant financial losses. Excessive fees can erode investment returns, particularly if hidden or higher-than-agreed charges are imposed. These examples of misconduct not only harm investors but also violate FINRA regulations, warranting a formal complaint.

Steps to File a Complaint Against Your Financial Advisor

Step 1: Gather Essential Information

Before filing a complaint, gather all necessary information to support your case. This includes the advisor’s CRD number, which can be found using the FINRA’s BrokerCheck tool, and detailed investment information such as account statements, trade confirmations and fee structures. BrokerCheck is a great resource for verifying a financial advisor’s credentials and identifying any past complaints or disciplinary actions. Having this information at hand will strengthen your complaint and make the investigation process easier.

Step 2: Explore Informal Solutions

Before escalating to a formal complaint, consider resolving the issue informally. Consulting with the advisor or the firm’s compliance department can sometimes clarify misunderstandings or correct errors without the need for formal action. It’s important to document all communications and outcomes, including emails, phone calls and meetings, as well as note the dates, times and responses you receive. Keeping detailed records ensures you have a clear timeline of events and evidence to support your case if an informal resolution is unsuccessful.

Step 3: Prepare Your Complaint

If informal remedies do not resolve the issue, it’s time to prepare a formal complaint. Writing a compelling Statement of Claim is essential, clearly stating the misconduct while including all relevant facts and evidence. Be concise yet thorough in explaining how the advisor’s actions have harmed you. Include copies of investment records, communications and other documentation supporting your claim. A well-prepared complaint will help the FINRA understand the gravity of the situation and expedite the investigation process.

Step 4: Filing Your Complaint With FINRA

To file your complaint with FINRA, you can use their online submission process, accessible via the FINRA website. This method allows you to submit your complaint electronically, ensuring a swift and secure transmission of your information. Alternatively, you can submit your complaint via mail or phone. Choosing the submission method that best suits your needs will help ensure your complaint is received and processed promptly.

Step 5: Following up and Next Steps

After filing your complaint, you can expect the FINRA to start an investigation. This process may involve requesting additional information or documents from you and the advisor in question. However, because the FINRA’s investigation focuses on regulatory compliance and the protection of all investors, it may not lead to the recovery of your money or securities. If you are seeking compensation, consider exploring other legal avenues, such as arbitration, mediation or private civil action, as relying solely on the FINRA’s investigation may limit your options. 

Be aware that FINRA staff cannot provide legal advice, so consulting with an attorney may be beneficial. Review your account agreement for any arbitration clauses that might limit your access to the courts. It’s important to stay informed about the progress of your case and respond promptly to any requests from the FINRA. Understanding the potential outcomes will help you manage your expectations and prepare for possible next steps.

Legal Advice and Considerations

Importance of Legal Consultation 

Before filing a complaint, it’s advisable to consult a FINRA arbitration lawyer. Legal advice can provide valuable guidance, helping you navigate the complexities of the FINRA’s processes and strengthen your case. A lawyer can assist in preparing your complaint, ensuring it’s comprehensive and compelling. If the complaint leads to arbitration, having legal representation can be crucial in presenting your case effectively. Consulting a lawyer before filing can increase your chances of a favorable outcome.

Potential Outcomes

The resolution of your complaint depends on the findings of the investigation. It’s important to know that investment losses alone aren’t enough for a complaint unless they’re caused by misconduct. Misconduct must be proven before the FINRA can take action. The complaint process can take several months to over a year, depending on the case’s complexity and investigation results.

Possible outcomes include disciplinary actions against the advisor, such as penalties, suspension or other sanctions. If you’re unsatisfied with the outcome, you may consider arbitration or mediation. Arbitration is more formal, while mediation involves a neutral third party to help reach a settlement. Note that the FINRA’s investigation is regulatory, focusing on compliance with industry rules. Seeking recovery of money or securities might require other methods, as FINRA’s actions may not result in repayment. Consulting an attorney for arbitration, mediation or civil action is advisable.

Have You Been Wronged by a Financial Advisor? Consult Sonn Law Group for Help

Filing a complaint against a financial advisor is a serious step that can help protect your investments and ensure that financial advisors adhere to ethical standards. By following these steps and understanding the process, you can take action to address any misconduct and seek resolution. Taking the time to prepare thoroughly and consult legal advice when necessary can significantly improve your chances of a successful outcome. Contact us today to discuss your situation and explore your legal options.

Frequently Asked Questions

Can I file a complaint if I only have investment losses?

Investment losses alone are not grounds for a complaint unless they result from misconduct. For the FINRA to take action, misconduct must be demonstrated. Misconduct could include fraud, negligence, unsuitable recommendations or violations of industry rules and regulations. It’s important to gather and present evidence that shows the advisor’s actions or inactions led to the investment losses. If you believe your losses are due to misconduct, you should provide detailed documentation and a clear explanation of how the advisor’s behavior caused your losses when filing your complaint.

How long does the complaint process take?

The duration of the complaint process can vary, typically several months to over a year, depending on the complexity of the case and the investigation’s findings. The length of time it takes to resolve a complaint depends on several factors, including the volume of evidence, the cooperation of involved parties and the nature of the alleged misconduct. Simple cases may be resolved relatively quickly, while more complex cases that require extensive investigation and analysis may take longer. Throughout the process, FINRA will keep you informed of the status of your complaint and any significant developments.

What if my complaint is not resolved to my satisfaction?

If you are not satisfied with the outcome, you may consider arbitration or mediation. Arbitration is a more formal process involving a neutral arbitrator or panel that reviews evidence and arguments from both parties before making a binding decision. Mediation, on the other hand, involves a neutral third party who helps facilitate a mutually agreeable settlement between the parties. Mediation is generally less formal and can be a quicker and less expensive way to resolve disputes. Additionally, you may want to consult with an attorney to explore other legal options, such as filing a private civil action. It’s also important to check your account agreement for any arbitration clauses, as they may limit your access to the courts.