Experts Say: Expect More FINRA Arbitration Cases Following Coronavirus and Market Volatility

Investment Losses During COVID-19 Pandemic May Have Been Caused By Fraud Or Negligence

According to experts, George Friedman and Rick Ryder, fears about the novel coronavirus (COVID-19) and the resulting market turbulence will lead to a rise in investor fraud claims and FINRA arbitration cases. Friedman is the Securities Arbitration Alert editor-in-chief and Ryder is the Securities Arbitration Commentator president and founder. 

In a recent blog post, What’s Past is Prologue, they spoke about how customers will wonder whether their stockbrokers and investment advisors properly handled their accounts, which are now being negatively affected by the ongoing market volatility. 

At Shepherd Smith Edwards and Kantas (SSEK Law Firm), we are speaking to investors who are asking this very question right now. Whether or not brokers and investment advisors wisely invested a customer’s money and/or were fraudulent or negligent can make a huge difference in how a portfolio might be impacted during a global crisis. 

Over the years, our investment fraud lawyers have successfully brought many broker negligence and investment advisor fraud cases before the Financial Industry Regulatory Authority (FINRA) on our clients’ behalf. Contact us today if you believe that you may become a victim of investment fraud during this period of market volatility. 

Volatile Times Tend to Cause an Upswing In Broker Negligence Claims

Ryder and Friedman spoke about how, when looking at history, the number of FINRA arbitration case filings tend to go “countercyclical” to the markets. 

As a result, when the markets were thriving between 2011 and 2019, the number of arbitration cases submitted dropped significantly by almost 50% compared to after the big financial crisis of 2009.  The same pattern was seen after 1987’s “Black Monday” crash.

Friedman also noted that market volatility, even more than a down market, tends to increase the chances of even more arbitration cases being brought before FINRA. And it’s not just the Coronavirus that’s causing the market to misbehave; so are the everchanging responses of the federal, state, and local governments as they work to contain a pandemic that is affecting more and more people each day. 

Not even the $50B aid package issued by the US to state and local governments or the Federal Reserve’s newly instituted bond-buying program to help stimulate economic growth has helped create more market stability. Economists, in the meantime, are crying recession.

Friedman and Ryder noted a number of allegations that could be made by customers against brokerage firms and their registered representatives during these times including:

  • Unsuitability
  • Overconcentration
  • Mismanagement of portfolios
  • Poor execution of trades

Other grounds for a broker fraud case during the current global pandemic might include failure to supervise, unauthorized trading, breach of fiduciary duty, churning, selling away, and other types of fraud or negligence.

Broker Fraud Lawyers

SSEK Law Firm has recovered many millions of dollars on behalf of thousands of investors. We helped investors during every financial crisis that’s happened over the last 30 years, including the 2009 housing market collapse, the Puerto Rico bond fail of 2013, and now the Covid 19 Pandemic of 2020. Your first consultation with us is a free case assessment where we work with you to explore your legal options.

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