How to Recover Investment Losses Through FINRA Arbitration

When investors experience significant losses due to broker misconduct or unsuitable investment advice, the first question is often simple and urgent: Is there a way to recover what was lost?

For many investors, the answer lies in FINRA arbitration, a dispute resolution process designed specifically for claims against brokerage firms and financial advisors. Understanding how this process works—and when to consult a FINRA arbitration attorney—is the critical first step toward potential recovery.

At Sonn Law Group, FINRA arbitration is not just a secondary practice area; it is a core pillar of the firm’s mission to protect investors.

What Is FINRA Arbitration?

FINRA (the Financial Industry Regulatory Authority) regulates broker-dealers and registered financial professionals nationwide. When disputes arise between investors and brokerage firms, FINRA arbitration is typically required under the terms of the investor’s account agreement.

Rather than proceeding in a traditional courtroom, claims are heard by neutral arbitrators with specialized experience in securities matters. The process is formal, evidence-based, and legally binding, but generally more efficient and streamlined than civil litigation.

Key Characteristics of FINRA Arbitration

• Mandatory Forum: Required for most brokerage account disputes under standard contracts.
• Efficiency: Typically faster and more focused than court litigation.
• Confidentiality: The process is generally private, unlike public court records.
• Binding Outcomes: Decisions (Awards) are enforceable in court.

The Value of Experienced Representation

FINRA arbitration is a unique legal ecosystem. It follows specific rules, timelines, and procedural requirements that differ significantly from civil court. Strategy, preparation, and familiarity with the selection of arbitrators can materially affect the outcome of a claim.

Jeffrey Sonn, the founder of Sonn Law Group, brings decades of experience, representing investors in securities disputes across multiple market cycles and regulatory shifts. This long-term perspective allows the firm to identify recurring patterns that others might miss, such as:

• Identifying common defense strategies used by brokerage firms to justify unsuitable investments.
• Pinpointing systemic supervision failures within firm records.
• Understanding how arbitration panels evaluate credibility and risk disclosures.

Common Grounds for Recovery

Not every investment loss qualifies for recovery. FINRA arbitration focuses on whether losses were caused by misconduct rather than normal market fluctuations. Common claims include:

• Unsuitable Recommendations: Investments that do not align with an investor’s age, risk tolerance, or financial profile.
• Unauthorized Trading: Transactions placed without the investor’s knowledge or consent.
• Overconcentration: Accounts focused too heavily on a single stock or sector, creating excessive risk.
• Misrepresentation or Omission: Failure to disclose material risks or conflicts of interest.
• Failure to Supervise: Claims against firms for inadequate oversight of their advisors.

How the FINRA Arbitration Process Works

While each case is unique, the process generally follows these stages:

1. Case Evaluation: A thorough review of account documents and transaction history.
2. Statement of Claim: A formal filing that outlines the allegations and the specific damages sought.
3. Firm Answer: The brokerage firm provides its legal response to the allegations.
4. Discovery Phase: Both sides exchange documents and evidence relevant to the case.
5. Arbitration Hearing: A formal presentation of testimony, evidence, and legal arguments before the panel.
6. Final Award: The arbitrators issue a binding decision.

Why Investors Should Seek Guidance Early

Many investors hesitate to speak with an attorney because they aren’t sure if their losses are “actionable.” However, early review is critical because FINRA claims are subject to strict eligibility rules and time limits. Key documents can also become harder to obtain over time.

With decades of experience, the team at Sonn Law Group helps investors distinguish between unavoidable market losses and losses caused by misconduct, providing clarity when it is needed most.