Why Securities Regulators Can't Help Defrauded Investors

You can complain to the SEC. You can complain to state regulatory agencies. You can complain to industry organizations (for instance the FINRA, an organization of securities dealers.) Thousands of people with legitimate complaints contact those regulators every year. And very few get any money back!

Why? The SEC is charged with enforcing laws, not with recovering damages for individuals. The people who work for the SEC are regulators. They can check to see if laws were broken and that correct practices were followed. They can refer cases to prosecutors. But they don’t recover money for investors.

The SEC gets about 50,000 complaints per year and they take action on less than a hundred. The FINRA gets around 5000 complaints per year and takes action on only a few hundred. When these organizations “take action” that means they fine the brokerage firms and/or they reprimand brokers; they do not recover money for investors.

Both the SEC and FINRA have small staffs compared to the number of brokers. There are a few hundred regulators for hundreds of thousands of brokers. Even if the SEC wanted to help you as an individual investor, they are not equipped to do so. State regulation of investment advisors.

The SEC website encourages investors to take legal action independently of any regulatory action.

In many cases, the firm or company denies wrongdoing, and it remains unclear as to who is wrong or whether any wrongdoing occurred at all. If this happens, we cannot act as a judge or an arbitrator and force a broker, brokerage firm, or company to resolve your complaint. But the law allows you to take legal action on your own.

Do you know how you can take legal action on your own? Both federal and state securities laws provide important legal rights and remedies if you have suffered wrongdoing. Acting on your own, you can seek to resolve your complaint through the courts, arbitration, or mediation.

To take advantage of these laws, you must take legal action promptly or you may lose the right to recover funds. Time restrictions, called “statutes of limitations,” vary from state to state. Federal securities laws generally require that you bring a court action within two years of the date that you should have reasonably discovered the wrongdoing, but in no case later than five years from the date the wrongdoing actually occurred.

We disagree with the SEC website where it tells investors to write complaint letters to their brokerage firms. We have seen letter-writing damage investor suits time and again. (See our page on common investor mistakes.)

In contrast to regulatory agencies, securities attorneys are here to help investors. The burden of proof is different for an attorney than it is for a regulator. The SEC is focused on regulating the entire securities industry. We are focused on recovering compensation for investors who have been wronged.

When you engage an attorney, be sure to choose one that

• Handles only securities cases
• Has been at it for a long time
• Knows the stockbroker industry inside and out

Shepherd Smith Edwards & Kantas LTD LLP attorneys have a combined 100 years experience in brokerage firms. Our firm was founded in 1990. We did not just start this practice after the technology stock crash. We know the securities law, we know the brokerage industry, we know the kind of challenges investors face.

This is a harder question than it might sound at first. Investors’ money is often spread over several accounts. And it’s a tricky accounting problem. For instance, if your broker pushes you into an inappropriate stock and the stock price climbs before falling, you can’t necessarily claim a loss from the highest price the stock reached. Further, inflating your claims in an arbitration will only make you look worse.

An experienced law firm like SSE can help you figure out what your legitimate, claimable losses are.

We’ve seen many situations where people complain and complain to the regulators. When they finally figure out that they are not going to get their money back, it’s often too late to file a case. The technicalities vary from case to case, but in general the rules are not the same as for personal injury suits like car accidents. You don’t necessarily have several years to file a suit.

The time clock on the statute of limitations for a case may start when the brokerage account was opened or when the stock was purchased (not when the stock price dropped). The time limitation typically includes the resolution time after a complaint has been filed.

Further, brokerage firms often try to stall and ask investors for clarification letters, hoping that the statute of limitations will expire before the investor contacts a law firm.

Another problem with attorneys inexperienced in this field is that they often don’t know the law or how to handle cases. This is very common in recent years as a flood of new attorneys has started practicing securities law. Three-quarters of the attorneys who claim to do securities cases did not do them four years ago. Shepherd Smith Edwards & Kantas LTD LLP, however, have been at this a long time. We’ve seen cases where investors had legitimate complaints, but their lawyers sat on the case too long, allowing the statute of limitations to expire.

If you have a good case and your lawyer doesn’t file a case within 90 days, then you need a different lawyer. We file most of our clients’ cases within 30 days. Most are filed with the FINRA or NYSE.

After assembling your information, we will help you decide which course of action to take.

Most of our cases are not tried in court. We negotiate with brokerage firms, or go through mediation or arbitration. As a last resort we litigate.

If we go to arbitration, we will suggest which forum to file in (usually the NYSE or FINRA). We will prepare the case (which is much like preparing a court case, although there are differences.) We will go to the arbitration proceeding with you and present your case.

Take note: Most investor cases are not heard in their hometown. You get no benefit from hiring a local attorney. Your best bet is to hire the best securities attorney you can find, regardless of location. If necessary to the case, SSE sometimes engages other firms when local representation is required. About Our Firm

Click here for bios of our attorneys.

You can read securities fraud case studies here.