Securities Fraud Attorney Blog

4,991securities arbitration cases have been filed at FINRA this year as of the end of August 2009. That is a 65% increase from 2008. Based upon our firm's case log and speaking with other attorneys who represent investors in securities arbitrations, I expect the numbers to increase even more by year end. The dramatic drop in the securities markets in 2008 and 2009 exposed some dubious behavior, including the misrepresentation of bond funds as low risk (ie Morgan Keegan, Citigroup MAT and Falcon, Schwab Yield Plus). Also, structured products, such as the Lehman Brothers Structured Notes sold by UBS, were pitched as safe alternatives to bonds and imploded causing many arbitration claims. The increase in case filings in 2008 and 2009 is the first big spike in filings since the 2001 through 2003 time period after the tech market collapsed. New case filings reached almost 9,000 in 2003. Many inexperienced attorneys jumped into the securities arbitration practice area after the tech bubble and got clobbered by savvy defense counsel. With the Madoff and Stanford scandals generating so much attention to the investment fraud area, we'll see if it happens again in this cycle.

Securities arbitration attorneys seem to be everywhere. Since the market collapse last October and the high profile securities frauds committed by Bernie Madoff and Allen Stanford, the ranks of attorneys who represent investors has grown significantly. As other litigation areas have struggled in this new economic climate, securities fraud is alive and kicking. Many litigators who have little experience in securities fraud arbitration and litigation are now holding themselves as experts in the space. Be wary.

Representing investors who have been defrauded by brokerage firms, investment advisors, banks, hedge funds and trust companies is a very specialized practice area. Investors searching for counsel should ensure that any securities attorney they hire has been through the wars with the investment industry. Significant securities cases are often defended by the large Wall Street law firms. A neophyte will be exposed.

How does one find an experienced securities attorney? A good place to start is PIABA – the Public Investors Arbitration Bar Association (piaba.org). PIABA is a national organization of attorneys who represent investors in arbitration proceedings against Wall Street firms. The PIABA site has a listing of attorneys by state who handle these matters. Speak to multiple attorneys before you hire one. After being taking advantage of once by the investment industry, make sure you’re not making mistake number two. Hire attorneys who practice securities law for a living.

Investors who file securities arbitrations received a quiet victory at the end of May. FINRA, the Financial Industry Regulatory Authority, quietly withdrew a proposal to the discovery rules in securities arbitrations that would have obliged investors to disclose even more of their financial histories than the present rules provide.

FINRA's proposal was filed with the SEC in March and intended to increase the responsibilities of investors who file customer arbitrations to produce, among other things, complete tax returns (instead of certain pages and schedules) for five years prior to the first transaction identified in the statement of claim (instead of three years).

The SEC received more than 50 comment letters about the proposal, mostly from attorneys who represent investors who objected. FINRA filed a two-page notice with the SEC, withdrawing the rule proposal, on May 21.

It’s good to see FINRA admitting it made a mistake and withdrawing the proposal.