Like having milk in your refrigerator, it’s not a good idea to let your securities fraud case sit too long. There are strict time deadlines for filing your securities fraud claims. The most common legal deadline is called a statute of limitations. This is a legal rule that may bar your claim if it is not filed on time. If the time clock on the statute of limitations runs out in your case, you will most likely lose your right to take any legal action. The best thing that you can do to avoid losing the right to bring your claim is hiring an attorney as soon as you learn of the harm or the bad conduct causing you harm. In a securities case, this can be as soon as you discover a loss, or as soon as you learn of a misrepresentation by your stockbroker, investment advisor or your brokerage firm.
Statutes of limitation or other time bars apply in various areas of criminal and civil law, including in some FINRA arbitration actions. Time limits and other sensitive time deadlines in investment fraud cases are often very complicated. This is why you need to consult with an experienced investment fraud attorney as soon as possible once you think you might have a case.
Investment Fraud: There are Two Separate Time Issues
If you are thinking about suing your stockbroker or brokerage firms, your claims are generally subject to mandatory FINRA arbitration. FINRA is the Financial Industry Regulatory Authority, and it has a dispute resolution department that handles the arbitration claims between brokerage firms and their customers. Instead of having a court hear your complex securities matter, the FINRA arbitration forum appoints arbitrators who have the necessary securities or business expertise to understand the particular legal issues surrounding allegations of investment fraud or negligence.
Because almost all investors at brokerage firms are subject to this mandatory FINRA arbitration, most securities fraud and broker negligence claims are resolved this way. If you believe you have been a victim of securities fraud or any other type of broker misconduct, you have a limited amount of time to file your arbitration claim. Figuring out exactly how much time you have to sue your stockbroker or the brokerage firm can be quite complicated.
First, there are two separate timing issues that must be considered:
- Eligibility under the FINRA Rules; and
- Applicable statutes of limitation.
Be Sure to File Your FINRA Arbitration Claim on Time
Unlike court, FINRA arbitration has an “eligibility” rule, requiring that all claims must be brought within six years of the occurrence or event giving rise to the claims. If you fail to take action within this time, you may lose the ability to take action at all.
This seems like a simple rule, but it’s not. While the brokerage firms like to measure the six years from the date a stock or investment is purchased, there are a number of other events that may trigger a later date for the running of the six year rule. For example, an unsuitable recommendation to hold a stock, or an ongoing fraud in the managing of an account may also serve as later triggers of the six year rule—well after the initial securities purchase date.
Eligibility is simply a shorthand designation meaning a claim is eligible, or “allowed,” to be brought in the FINRA forum. If a claim is deemed eligible, this allows the claimant investor to enter the gates of the FINRA forum. If the occurrence or event giving rise to the claim is older than six years, FINRA can reject it as “ineligible,” but it may still be able to be brought in a court of law. For this to happen, though, the claim must not be barred by the statutes of limitation applicable to each cause of action.
Statute of Limitations
It should be noted that securities dispute cases are highly complex and that eligibility is not the only time rule. The various statutes of limitation differ from FINRA’s procedural eligibility rules. Many claims for securities fraud are brought under Section 10(b) of the Securities Exchange Act of 1934 or SEC Rule 10b-5, which have their own time limitations.
A securities fraud or negligence case may also be brought under a number of other federal or state laws. Each cause of action, however, has its own specific statute of limitation, and some are longer than others.
Because of the nature of the securities business, and the fact that multiple investments may be bought and sold at different times, it’s often difficult to determine the exact moment that those statute of limitations clocks start running. Generally, each individual case is determined on its own facts.
How Soon Should I File My Securities Arbitration Claim?
Although technically you have six years to file a FINRA arbitration claim, in truth measuring that time is complicated. And, this is further complicated by the application of state and federal statutes of limitation which might be shorter (and in some cases longer). While the FINRA rules might not stop you from bringing a claim before the six year clock runs out the analysis does not end there. The applicability of other laws and principles which are shorter than six years may still be in play.
Time limitations in stockbroker fraud or negligence cases are quite complex and there are a fair amount of overlapping factors to be considered. Depending on the specific facts of your case, both federal and state statutes of limitation are part of the equation as well as the analysis under the FINRA eligibility rule.
Things can be even more murky because it is not always clear exactly when the statute of limitations clock should begin running. For example, if you are dealing with a claim for overconcentration of securities (also known as lack of diversification) this most likely involves a number of different securities transactions that might span over many years. Arbitrators would need to consider the latest of these transactions the “occurrence or event” for the purposes of calculating the six year eligibility rule. This same scenario comes up with other common investor claims, such as account mismanagement claims and excessive trading (“churning”) claims.
Seek the advice of an attorney right away if you feel that you have been the victim of investment fraud. Your attorney will need to review your individual case in detail to assess how the statutes of limitation and FINRA six year eligibility rule might apply to you. If you have suffered investment losses, you need to preserve your legal rights and by seeking legal advice right away. Consult with an experienced investor fraud attorney as soon as you possibly can! The last thing you want is to lose out on a valid claim simply because of a legal technicality.
Get Legal Help Today
If you feel you have been the victim of investment fraud or negligence, you should not delay. Act as soon as possible to retain an experienced FINRA arbitration attorney. If you or a loved one have suffered investment losses as a result of any 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 844-635-1609 or 305-349-2336.