Fine Print in Broker Contracts

Would you have surgery performed by a doctor who doesn’t carry malpractice insurance?  Would you go up in a plane with an unlicensed pilot at the controls? The answer is obvious, of course you wouldn’t.  But did you know that when you invest your funds without doing proper research you are at risk for more than just financial loss, you actually sign away your rights to sue the brokerage firm and you may not be protected?

The service agreements that you sign with your broker limit your recourse to an arbitration process that is controlled by the Financial Industry Regulatory Authority, otherwise known as FINRA.

Is FINRA a Government Agency?

Whenever we open a brokerage account we sign away our right to sue the firm for any reason. And if you are like 80% of investors you do not even read the service agreement (contract) that contains the arbitration restriction. Unlike the FDIC, the Federal Deposit Insurance Corporation, which is a Federal Government agency established to protect the funds you invest in a bank, FINRA is NOT run by the government but, rather, calls itself “an independent, not-for-profit organization authorized by Congress to protect America’s investors by making sure the securities industry operates fairly and honestly”.

The truth is FINRA is funded by Wall Street and it is what is called an SRO (Self-Regulatory Organization). Wall Street is regulating itself.

The Securities and Exchange Commission (SEC) goes along with it because Wall Street special interests control the politicians who control the SEC.  And there are questions as to whether the members of the arbitration panel are too biased to rule for the consumer.  Efforts have been made to pass legislation under the terms of the Freedom of Information Act (FOIA) to have FINRA records scrutinized, but these requests have been denied by the SEC.  Congress needs unbiased members who are willing to protect the investor rather than their own interests to step in and investigate, but this hasn’t happened yet.

The bottom line?

DO YOUR HOMEWORK! Know your rights!  Read  any contract or agreement you are asked to sign!  Don’t assume because your broker is friendly he or she has your best interests at heart.  The best and most educated of us have lost not only our funds but our rights to go after those responsible.

If you want to know more, check out the Facts About FINRA Arbitration on our website.

Are you caught in a difficult situation with your financial advisor or brokerage firm? Please contact us.