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Time limits to keep in mind when challenging a neglectful broker

Time limits to keep in mind when challenging a neglectful broker

On Behalf of | Aug 27, 2021 | Stock Broker Misconduct or Fraud

Many New Yorkers turn to financial advisors or stockbrokers to help them plan for the future and increase their holdings. After all, interest rates on savings accounts and other secure investments have been historically low, and other forms of investments offer higher yields and greater growth. However, the stock market is known for fluctuations in price. No stock market pick is a guaranteed winner, but brokers and financial advisors also have responsibilities to their clients. Brokers have an ongoing fiduciary duty, meaning that they must look out for the best interests of their clients when making investments or managing portfolios.

Broker negligence can harm clients

Some neglectful brokers fail to act to protect their client’s interests, choose random or unsuitable investments, fail to provide important information to their clients or create risky, undiversified portfolios for inappropriate clients. As a result of a negligent financial advisor’s actions, their clients may lose thousands or even millions of dollars. While a stock market loss in itself does not give rise to a legal claim, unlawful negligence can cause serious damage. Affected clients may have a securities law case to pursue against the broker responsible.

Time limits can bar successful claims against negligent brokers

In order to successfully pursue a claim, it is important to act in a timely fashion. Most claims against financial advisors are pursued through the Financial Industry Regulatory Authority arbitration system. Rule 12206 states that no claim may be submitted for FINRA arbitration after “six years have elapsed from the occurrence or event giving rise to the claim.” While cases ineligible for FINRA arbitration may be refiled in court, this is rarely a successful option.

The statute of limitations for state or federal securities law claims is also important; while they may vary, key regulations require broker negligence claims to be filed no more than two years after the harms were discovered and no more than five years after the misconduct itself.

Acting quickly after the actions of a negligent financial advisor come to light may help affected investors to protect their rights. Investors may also be able to recoup some of their losses.