You have spent years building up your retirement account in the hope that one day you will be able to live out your golden years doing the things you want to do with the people you want to do it with. So, what happens when those plans are dashed by an unscrupulous or negligent stockbroker or financial advisor? You may have the right to recover your investment losses through FINRA arbitration.

FINRA arbitration is a mechanism through which an investor or account holder can seek to recover losses against a brokerage firm or financial advisor whose negligence, intentional misconduct, or fraud has resulted in investment losses. Because of the nature of a 401k or other retirement account such as a 403(b) (owned by many teachers), special rules and procedures apply to those accounts. Most broker-dealers have policies in place designed to ensure that such accounts are properly managed and supervised. When those rules are violated and an investor suffers losses, the results can be devastating.

So, what can you do to ensure that you are not a victim of broker fraud or mismanagement in connection with your retirement account?

The first thing you should do when setting up a 401k account, whether individually or through your employer, is to check out the proposed advisor.

It is important to check out your financial advisor BEFORE you invest. The Securities and Exchange Commission (“SEC”) does not regulate or oversee retirement plans, such as pensions plans or 401(k) plans. That falls under the jurisdiction of the Department of Labor (“DOL”). The DOL suggests several things you should do before you select an adviser so that you have a clear understanding of the adviser’s responsibilities to you and how he or she may be conflicted by the fees he or she receives when giving you advice. 

Is there a Conflict of Interest?

An important fact that many investors should research early on is whether the adviser is acting as a “fiduciary,”–  which means that the adviser is working solely in your best interest, and is not conflicted by compensation arrangements that may encourage that broker to steer you into investments that generate more profits for that broker.

The DOL suggests that you ask the following questions, to help you protect yourself and your assets:

Do you consider yourself a fiduciary?

1. If not, why not?
2. Are you willing to act as a fiduciary with a duty to act solely on my behalf?
3. Are you willing to disclose to me any conflicts of interest that may interfere with your acting solely on my behalf?
4. Are you willing to put this commitment in writing?

How are you compensated?

1. Do you earn fees or commissions based on the number of products that I buy or the size of my investment?
2. Will you earn a higher fee or other types of compensation if I invest in certain products you recommend or will you receive fees for services related to specific investment products?
3. Will you provide a list of the fees and commissions you receive either directly from me or from other sources in writing?

Are you a licensed or registered investment adviser?

1. Are you registered with the State, U.S. Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), or the Certified Financial Planner Board of Standards, Inc. (CFP Board)?
2. For how long? What is your experience?
3. Who supervises you, or, are you a sole practitioner?
4. If a sole practitioner, do you have professional liability insurance?

Have you (or your firm) ever been disciplined? For what?

One way to do this is to look up the broker or firm on FINRA broker check. This resource will let you know how long the broker has been licensed in the industry as well as if there have been customer complaints, regulatory actions, or arbitration actions brought against the broker as well as the resolution of such claims. 

You May Have the Right to Recover Your Retirement Account Losses


If you or a loved one have suffered investment losses in your 401k, 403(b) or retirement account, or have been the victim of any other type of investment fraud or broker negligence, contact the offices of Investment Fraud lawyer Melanie Cherdack for a free consultation. Because she has been in the trenches as a former Wall Street attorney, Melanie Cherdack and her team of experienced attorneys have seen just about every type of investment fraud or investment scam. While almost every investment carries a degree of uncertainty and risk, you may have been unnecessarily exposed to such risk. Former Wall Street securities attorney Melanie S. Cherdack and her team of lawyers represent individual and institutional investors who are unwitting victims of investment fraud and broker negligence. She heads up a group of attorneys who represent investors across the United States. Contact us by filling out our online contact form, or calling 888-768-2499 or 305-349-2336.