Arbitration Versus Litigation in Financial Fraud situations
If you have suffered losses from securities fraud, there are several factors that help in calculating which legal proceeding will best fit your claim:
· The amount of money you lost
· The amount of money you have to use on legal proceedings
· If you were the only victim of fraud, or if other investors were also wronged by the same stockbroker or investment firm.
Arbitration is currently the most shared option for individual investors proceeding against investment firms. This is used mostly for individual investors who did not lose large sums of money and do not have the funds to take on an extensive suit against the stockbroker. Arbitration often works against the investor. You should talk to an attorney specializing in stockbroker fraud before you choose this option.
Litigation against investment firms usually involves individuals joining together to file a class-action lawsuit. This option pools together resources in order to make a large case against the defendant.
Arbitration: An individual option
Arbitration is an different to litigation in which two parties at odds submit their claims to a panel of third-party arbitrators. These arbitrators review claims and execute a binding legal decision. Traditionally, the arbitration panel consists of one specialized within the field of securities and two public arbitrators from outside of the securities field. These professionals are often attorneys, accountants or bankers, educators or judges. The U.S. Securities and Exchange Commission has recently established that an investor has the right to request an arbitration panel consisting of all public arbitrators, but this request must be made soon after the arbitration course of action begins.
Arbitration is meant to be a quicker and cheaper way to settle disputes compared to the traditional legal system. Proceedings are held in a conference room and include months of preparation. The rules of arbitration are complicate and strictly enforced, which often gives the assistance to large investment firms over the investor. Arbitration awards are only unprotected to court review in a limited number of situations. If you plan on settling a claim against a securities firm in arbitration, you should contact an attorney who specializes in stockbroker fraud as soon as you decide to take action.
Litigation: strength in Numbers
Most litigation that occurs in situations of stockbroker and other investment fraud transpires in the form of class action lawsuits. Class action suits unite the grievances of multiple investors into a centralized case against an investment firm or stockbroker.
Class action claims are often formed around fraudulent behaviors such as churning, unsuitability, or excessive trading. Any investor involved in a class action suit must have suffered financial loss during the class period-the time period during which the defendant company was reportedly participating in securities fraud.
A federal court determines if the filed grievance meets the requirements for a class action lawsuit. If so, a rule plaintiff is appointed by the court to represent all the members of the suit. Usually, the rule plaintiff has the largest financial interest in the court’s decision.
A class action lawsuit is a good option for victims of stockbroker or other investment fraud. The suit pulls together the resources of many in order to stand up to large investment firms.
If you think you are a victim of financial fraud and you want to proceed with arbitration or litigation, you should contact a securities litigation attorney to determine your legal options.