Arbitration versus litigation in financial fraud cases

If you have suffered losses due to securities fraud, there are several factors that help determine which legal procedure will best suit your claim:

The amount of money you lost

The amount of money you have to spend on legal proceedings.

If you were the only victim of fraud, or if the same broker or investment firm also harmed other investors.

Today, arbitrage is the most common option for individual investors acting against investment firms. This is primarily used for individual investors who did not lose large sums of money and do not have the funds to pursue an extensive lawsuit against the broker. Arbitrage often goes against the investor. You should speak with a brokerage fraud attorney before choosing this option.

Lawsuits against investment firms generally involve people coming together to file a class action lawsuit. This option gathers resources to present a comprehensive case against the defendant.

Arbitration: an individual option

Arbitration is an alternative to litigation in which two opposing parties present their claims to a panel of external arbitrators. These arbitrators review the claims and execute a binding legal decision. Traditionally, the arbitration panel consists of one professional within the securities field and two public arbitrators outside the securities field. These professionals are usually lawyers, accountants or bankers, educators or judges. The US Securities and Exchange Commission has recently established that an investor has the right to request an arbitration panel comprised of all public arbitrators, but this request must be made shortly after the arbitration process begins.

Arbitration is intended to be a faster and cheaper way to resolve disputes compared to the traditional legal system. The proceedings are held in a conference room and require months of preparation. The rules of arbitration are complex and strictly enforced, which often benefits large investment firms over the investor. Arbitration awards are only subject to judicial review in a limited number of situations. If you plan to resolve 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: power in numbers

Most litigation that occurs in brokerage and other investment fraud cases takes the form of class action lawsuits. Class action lawsuits unite the complaints of multiple investors in a centralized case against an investment firm or stockbroker.

Class action claims are often formed around fraudulent behavior such as shake, inappropriateness, or over-trading. Any investor involved in a class action lawsuit must have suffered a financial loss during the class period.–the period of time during which the defendant company allegedly engaged in securities fraud.

A federal court determines whether the filed complaint meets the requirements for a class action lawsuit. If so, the court appoints a lead plaintiff to represent all members of the lawsuit. Typically, the lead plaintiff has the greatest financial interest in the court’s decision.

A class action lawsuit is a good option for victims of stockbroker fraud or other investment fraud. The lawsuit brings together the resources of many to deal with large investment firms.

If you believe you are a victim of financial fraud and wish to proceed with arbitration or litigation, you should contact a securities litigation attorney to determine your legal options.