How to Fight Back
If you've been burned by one of these investments, you likely can't sue the issuer or the broker who sold it. Under most brokerage contracts, an investor waives the right to sue and accepts binding arbitration. To get your money back, you usually must prove that the product was "unsuitable" for you. Under current law, brokers aren't required to put your interests ahead of their own unless they're also registered investment advisers, but they are required to sell products that are suitable for your investment objectives and financial situation. First, talk to your broker's manager.
If you think you've bought an unsuitable product or your broker ignored your investment guidelines, the brokerage management needs to know. You may get your money back through a direct settlement with the brokerage. Even if you don't, inform the firm's supervisors as soon as you see a problem.
File an arbitration claim
Most attorneys who specialize in this field prefer clients with claims exceeding $50,000. You can locate a lawyer through the Public Investors Arbitration Bar Association ( 888-621-7484). An attorney who takes your case usually takes one-third of your award. Have a smaller claim? The Securities and Exchange Commission (SEC) offers Arbitration/Mediation Clinics, which work out of law schools (mostly in the Northeast) and are generally free for investors with limited income. You don't need to live near a clinic to request assistance. For a list of clinics visit sec.gov/answers/arbclin.htm.
Submit a complaint
FINRA, the Financial Industry Regulatory Authority, has a customer-complaint form online and investigates complaints about broker-dealers. FINRA also offers mediation services.
Request an investigation
Contact your state securities administrator: These frontline regulators can investigate your complaint. If there's a significant problem — or if you think you're the victim of a financial crime — they can file suit and gain compensation for fleeced investors. Find your state regulator via the North American Securities Administrators Association (202-737-0900). Another good option: Contact your state attorney general's office. During the dot-com-bubble years, many attorneys general (such as New York's Eliot Spitzer) performed tough investigations and won investor repayment suits that the SEC and FINRA largely avoided. All have attorneys who monitor and prosecute consumer and investor fraud. Locate the attorney general's office in your state through the National Association of Attorneys General.
John F. Wasik, a personal-finance columnist for Reuters, is the author of The Cul-de-Sac Syndrome: Turning Around the Unsustainable American Dream and 12 other books. This article is based on research funded by a grant from The Nation Institute.