Sometimes clients ask us how they  can submit a FINRA complaint against their broker or brokerage firm to begin an investigation into suspicious or fraudulent conduct.

There is a mechanism to do this, although it is different from filing a FINRA arbitration claim where you can seek money damages. Through its Investor Complaint Program, FINRA investigates complaints against brokerage firms and their employees. FINRA is empowered to take disciplinary actions against brokers and their firms. Sanctions may include fines, suspensions, a barring from the securities industry or other appropriate sanctions.

How to Initiate a FINRA Investigation

FINRA has a procedure through which investors and persons acting on behalf of investors can file a complaint when they feel that they have been subjected to improper practices involving their broker or brokerage firm. Through the Investor Complaint Program, investors and others acting on their behalf can immediately alert FINRA to potentially fraudulent or suspicious activities by their brokerage firms or brokers. 

Once a Complaint is filed, if a determination is made by FINRA to initiate an investigation, a FINRA examiner might contact you to ask for additional information or documents regarding your complaint. You can submit a complaint online through FINRA’s Investor Complaint Program.  or by mailing your complaint to: FINRA Investor Complaint Program 9509 Key West Avenue Rockville, MD 20850-3329 Fax: (866) 397-3290 

According to FINRA’s investor complaint brochure , if you are filing a complaint for investigation, it must contain the following information: 

  1. Name of the brokerage firm and the individuals at the firm with whom you dealt; 
  2. Names of the security or securities that are the subject of your complaint, or a detailed description of the practice or behavior that is the subject of your complaint; 
  3. Date or dates of the problem activity or transaction;  
  4. Detailed descriptions of the events as well as the circumstances surrounding the activity that is the subject of your complaint; 
  5. Your address and a phone number or email address where you can be reached. 
  6. If you decide to send a letter you should include copies of sales confirmations, monthly statements for the relevant time period and all relevant correspondence with the firm. 

FINRA  does not have jurisdiction to look at every type of investment activity. It has power over most brokerage firms and their employees and associated persons. To see if this applies to your broker or firm, you can look up whether they are a FINRA member firm on brokercheck. 

If you have a problem with an investment adviser, transfer agent, mutual fund or public company, you should try to file a complaint with the SEC or your state securities regulator. 

Prohibited Broker Conduct

Certain conduct in the securities industry is prohibited. These include, but are not limited to: 

  1. Unsuitable Recommendations. Recommending to a retail customer a securities transaction, investment strategy or type of account that is not in the best interest of that customer, given the customer’s age, financial situation, investment objective, risk tolerance, liquidity needs and investment experience. Investment in a particular type of security may not be in the best interest of the retail customer, or the amount or frequency of transactions may be excessive and therefore not be in the best interest for a given retail customer. 
  2. Unauthorized trading. Purchasing or selling securities in a customer’s account without first contacting the customer and receiving the customer’s authorization to make the sale or purchase, unless the broker has received from the customer written discretionary authority to effect transactions in the account or the broker was given discretion as to price and time. 
  3. Mutual Fund Switching. Switching a customer from one mutual fund to another when there is no legitimate investment purpose for the switch. 
  4. Misrepresentation or Omission of Facts. Misrepresenting or failing to disclose material facts concerning an investment. Examples of information that may be considered material and that should be accurately presented to customers include: the risks of investing in a particular security; the charges or fees involved; company financial information; and technical or analytical information, such as bond ratings. 
  5. Theft. Removing funds or securities from a customer’s account without the customer’s prior authorization. 
  6. Excessive charges. Charging a customer excessive markups, markdowns, or commissions on the purchase or sale of securities. 
  7. Guarantees of results. Guaranteeing customers that they will not lose money on a particular securities transaction, making specific price predictions or agreeing to share in any losses in the customer’s account. 
  8. Private securities transactions with brokers. Private transactions between a broker and a customer may violate FINRA rules, particularly where the transactions are done without the knowledge and permission of the sales representative’s firm. This is sometimes referred to as “selling away.”
  9. Trading ahead of Customer. This conduct involves placing an order for the firm’s account before entering a customer’s limit order, without having a valid exception. 
  10. Limit Order Omission. Failure by a market maker to display a customer limit order in its published quotes, without a valid exception. 
  11. Best Execution Violation. Failing to use reasonable diligence to see that a customer’s order is executed at the best possible price, given prevailing market conditions. 
  12. Insider Trading. Purchasing or selling a security while in possession of material, non-public information about an issuer. 
  13. Securities Fraud. Using manipulative, deceptive or other fraudulent methods to effect transaction in, or induce the purchase or sale of, a security

Once  FINRA receives your complaint,  its staff normally will begin an investigation by requesting the information and documents from the brokerage firm which is implicated in order to verify the information and uncover additional facts.  However, FINRA does not open an investigation for every investor complaint. It does have the power to sanction the firm and the broker for the conduct. 

How Do I Recover Money for Securities Fraud?

If you want to recover money for the conduct listed in the complaint, you will have to 

file a FINRA arbitration claim for damages.

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.