What Triggers a FINRA Investigation?

If a broker’s misconduct has caused you to sustain losses—or if you suspect that something is amiss with your investments—it’s important to understand what triggers a FINRA investigation. FINRA (the Financial Industry Regulatory Authority) is a regulatory body that protects investors, regulates brokers, and works to ensure transparency and fairness throughout the investment process.

At Stock Market Fraud Law Firm, our securities arbitration lawyers have extensive experience in a wide range of complex investment matters. If you have suffered losses due to a broker’s negligent actions, we want to hear your story. Our firm is committed to holding negligent brokers and brokerage firms accountable for their wrongdoing.

The Two Sides of FINRA: Arbitration and Regulation

To understand what triggers a FINRA investigation, it’s important to first understand the organization’s dual functions. FINRA operates through two distinct areas: the arbitration side and the regulatory side.

1. Arbitration: Your Path to Recovery

The arbitration side of FINRA is designed to resolve disputes between investors, brokers, and brokerage firms. If you’ve suffered financial losses due to broker misconduct, you may file an arbitration claim through FINRA. This process allows you to recover your losses and seek justice for wrongdoing.

The arbitration process begins when you file a Statement of Claim, outlining your case and the damages you’ve incurred. This document not only serves as the foundation for arbitration proceedings but also signals FINRA’s regulatory side to review the matter. If the allegations indicate a potential violation of FINRA rules or securities laws, the regulatory side may decide to launch an investigation that would run parallel to the arbitration hearing.

2. Regulation: Ensuring Industry Accountability

FINRA’s regulatory side plays a different role. While arbitration focuses on helping investors recover losses, the regulatory side is dedicated to maintaining the integrity of the financial industry. This includes investigating brokers and brokerage firms for potential misconduct.

The regulatory side does not assist in recovering losses but enforces compliance with industry rules and standards. Depending on the severity of the misconduct, FINRA may:

• Issue fines
• Suspend licenses
• Bar brokers or firms from the industry permanently

Common Triggers for FINRA Investigations

FINRA investigations can be triggered by various factors, such as:

Customer Complaints

Investor complaints, such as unauthorized trading, unsuitable investment advice, or excessive fees, are one of the most common triggers for FINRA investigations. Complaints can be filed directly with FINRA or included in arbitration claims. FINRA reviews these allegations to determine if they indicate a violation of industry rules or ethical standards.

Arbitration Claims

Arbitration claims often act as a springboard for regulatory scrutiny. When a claim alleges misconduct, such as falsifying account statements or misrepresenting risks, it may prompt an investigation.

Internal Whistleblowers

Reports from brokerage firm employees or brokers themselves can alert FINRA to misconduct. Whistleblower reports often reveal serious issues like conflicts of interest or systemic unethical practices.

Routine Audits and Examinations

FINRA regularly audits brokerage firms to ensure compliance. These examinations may uncover irregularities, such as failure to supervise brokers, leading to investigations of both the firm and its employees.

Market Surveillance

FINRA uses advanced technology to monitor trading activity and identify patterns like insider trading or excessive trading (churning). Suspicious activities detected through surveillance often trigger investigations.

Media Reports or Public Information

Sometimes, news reports or public allegations of broker misconduct catch FINRA’s attention, leading to formal investigations to verify the claims.

How Can a Securities Arbitration Lawyer Help?

Navigating securities arbitration on your own can feel overwhelming, especially when the stakes are high. While you’re not required to hire a lawyer for the process, having an experienced securities arbitration attorney in your corner can make all the difference. Here’s how they can help:

Assist Before You File a Claim 

Investment disputes aren’t always straightforward. The rules, regulations, and scenarios that apply can be complex, and it’s not always clear when a broker’s actions have crossed the line. That’s where a skilled lawyer comes in.

Before filing a claim, an attorney can evaluate your situation, identify any violations, and determine whether you have a viable claim.

Ensure that Your Claim Is Filed Correctly

Once you’ve decided to pursue a claim, the paperwork begins—and it needs to be handled carefully. From meeting deadlines to preparing a compelling Statement of Claim, every step of the process matters.

An attorney will ensure everything is done correctly. They’ll craft a Statement of Claim that clearly outlines your allegations and damages, helping you present the strongest case possible.

Keep You on Track with Deadlines and Discovery

The arbitration process can feel like a maze of deadlines and document requests. Missing even one deadline could jeopardize your claim, and knowing what information to share—or withhold—can be tricky.

A securities arbitration lawyer will keep everything running smoothly. They’ll ensure all deadlines are met and help you navigate the discovery process, protecting any privileged information while ensuring you comply with FINRA rules.

Choose the Right Arbitrator

Did you know you have a say in who arbitrates your case? Many investors don’t. Selecting the right arbitrators from the list provided can significantly impact your case.

A knowledgeable attorney will help you make an informed choice, selecting arbitrators who are best equipped to understand the details of your claim.

Prepare and Present Your Claim at the Hearing

When it’s time for your hearing, you can count on the brokerage firm to show up with experienced lawyers. You deserve the same level of preparation and representation.

Your attorney will handle all the heavy lifting—gathering evidence, preparing arguments, and presenting your case in a compelling way. Your lawyer’s goal is to level the playing field and ensure your voice is heard.

Help You Secure the Best Possible Outcome

Once the hearing is over, the arbitrators will issue a decision that is final and binding under FINRA rules. That’s why it’s so important to get it right the first time.

With an experienced securities arbitration lawyer advocating for you, you’re in the best position to recover the full compensation you deserve.

Talk to a Securities Arbitration Lawyer for Free

If you’ve invested in bonds, annuities, commodities, mutual funds, private placements, or other securities and suspect that your advisor or broker may have acted negligently, we encourage you to connect with our securities fraud lawyers right away. Getting the right legal support can make all the difference when pursuing financial recovery.

Call (888) 513-3010  today for a FREE case evaluation with an experienced securities fraud lawyer. We serve clients throughout the state of Florida and Nationwide.