FINRA Securities Arbitration or Class Action Lawsuits?

A common question asked by investment fraud victims is whether they should partake in a class action lawsuit of a securities arbitration claim. Often, investors are presented with a choice of either partaking in a class action lawsuit or FINRA arbitration action. As a general rule of thumb, investors are better off avoiding class action lawsuits. The recovery rate in class action lawsuits tend to be paltry. Please realize this is not always the case but it is very common.

The main reasons for why FINRA securities arbitration actions are typically better than class action lawsuits for investors include the following reasons…

1) Investors usually have a better chance of recovering more in FINRA arbitrations than class action lawsuits. The average recovery in class action lawsuits is about 3-6 cents on the dollar.

2) Arbitration claims against brokerage firms like Merrill Lynch, Ameriprise, Citigroup Smith Barney and LPL Linsco typically take 12-16 months to resolve. Class action lawsuits can take more than a decade.

3) Individual differences don't get amplified in class actions. If a client has a particularly strong case or good facts on his side, those facts will usually get lost in the class action lawsuit.

4) Suitability and churning claims can't be heard in class action lawsuits. There needs to be very common facts and circumstances for a class of victims to move forward with a class action lawsuit. Therefore, not all securities fraud claims can move forward with a class action lawsuit.

5) Control. In a securities arbitration claim, clients have control over the process. A client can settle or go forward with an action without having to consult with others.

All major brokerage firms, including Morgan Stanley, Wachovia and UBS have been hit with a slew of class action lawsuits and FINRA securities arbitration claims for fraud claims. The decision to move forward with either a class action lawsuit or securities arbitration claim is extremely important as clients really only get one bite at the apple in terms of recovery-either a class action settlement or a FINRA securities arbitration claim result.

Victims of the Bernard Madoff investment scam will be faced with the decision in the future...class action or individual arbitration claim. While it is not certain whether Madoff's firm had a binding arbitration clause in the new account agreements with clients, it is more likely than not that an arbitration clause is present.

For more information on recovering investment fraud losses, please contact Stoltmann Law Offices in Chicago, Illinois.

Stoltmann Law Offices
10 S. LaSalle, 35th Floor
Chicago, IL 60603
312.332.4200
www.Investmentfraud.PRO