Written by: Alexander Rodriguez, Esq., Managing Partner. Updated August 2026.
Yes, if your losses were caused by misconduct rather than the market. Losing money on investments is not, by itself, a legal claim. Losing money because your advisor recommended unsuitable investments, misrepresented what you were buying, traded without authorization, or churned your account can be. Most of these claims are decided in FINRA arbitration rather than in court.
When losses become a legal claim
Markets fall, and an advisor is not liable just because an account lost value. The question is whether the advisor breached a duty owed to you. The recurring categories:
Unsuitable recommendations. Brokers must have a reasonable basis to believe a recommendation fits your profile: age, income, objectives, risk tolerance, liquidity needs. Since 2020, Regulation Best Interest requires broker-dealers to act in a retail customer’s best interest when making recommendations. A retiree who needed income and was put into illiquid, high risk products has a suitability story worth examining.
Misrepresentation and omission. FINRA rules and the antifraud provisions of the securities laws prohibit misleading statements about an investment’s risk, liquidity, or nature. What you were told, and what was left out, matters as much as what you bought.
Unauthorized trading. Trades you did not approve, in a non-discretionary account, are a violation regardless of how they performed. Investors describe this constantly: an advisor who was asked to invest conservatively and did the opposite. Whether the account was discretionary, and what the agreement actually authorized, is where the analysis starts.
Churning and excessive trading. Trading whose frequency serves the advisor’s compensation rather than your objectives. The account statements themselves are usually the core evidence: turnover, cost to equity ratio, commission patterns.
Failure to supervise. Brokerage firms must supervise their representatives. When an individual broker committed the misconduct, the firm’s supervision is often the claim that reaches a solvent respondent.
If your advisor is a registered investment adviser rather than a broker, the duty is stricter still. The Supreme Court recognized decades ago that the Investment Advisers Act imposes fiduciary obligations on advisers, in SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180 (1963). Fiduciaries owe you loyalty and full disclosure, including about conflicts of interest.
Why “sue” usually means FINRA arbitration
Nearly every brokerage account agreement contains a predispute arbitration clause, and the Supreme Court held those clauses enforceable for securities claims in Shearson/American Express Inc. v. McMahon, 482 U.S. 220 (1987). That is not bad news for investors. FINRA operates the forum where these disputes are heard, member firms are required to participate, and the process is generally faster and less formal than court. FINRA’s own data shows a large majority of customer cases end in settlement or an award of damages rather than a full loss.
Our FINRA arbitration practice covers the forum itself. The short version: a statement of claim starts the case, the firm answers, arbitrators are selected by both sides, documents are exchanged, and the case ends in settlement or a final, binding award.
The deadline most investors do not know about
FINRA’s eligibility rule closes the forum to claims more than six years after the events at issue, and state statutes of limitations for the underlying legal claims are typically shorter. The practical point: the clock runs from the events, not in every case from when you discovered the problem, and waiting costs options. Our page on FINRA arbitration rules covers the time limits in more detail.
What to gather before you talk to a lawyer
- Account statements for the full period, not just the loss months
- The account opening documents and any updates to your investor profile
- Emails, texts, and notes of calls with the advisor
- Marketing materials or presentations you were given
- A short timeline in your own words: what you asked for, what you were told, what happened
Counsel can obtain the rest in the arbitration’s document exchange, but these establish the shape of the claim quickly.
Frequently asked questions
Can I sue if I just lost money in a market drop?
No. Market losses without misconduct are not a claim, and any lawyer who suggests otherwise is not doing you a favor. The analysis is always about the advisor’s conduct: what was recommended, what was disclosed, and what was authorized.
I signed an arbitration agreement. Do I still have rights?
Yes. The agreement changes the forum, not the claim. Arbitration clauses in brokerage agreements are enforceable, and FINRA arbitration is where these cases are decided. The claims themselves, and the recovery available, remain.
My advisor is a fiduciary. Does that help my case?
Often, yes. Registered investment advisers owe fiduciary duties of loyalty and disclosure. Conduct that might be argued over under a suitability standard can be a clearer breach for a fiduciary. Which standard applies depends on how your advisor is registered and what role they played.
How long do I have to bring a claim?
FINRA’s forum is closed to claims more than six years old, and the legal claims inside a case carry their own shorter state law deadlines. Treat the timeline as short. The specific deadlines for your situation are one of the first things counsel will establish.
What will this cost me?
How an engagement is structured depends on the case. Contact the firm to discuss your situation.
This article is general information, not legal advice. Reading it does not create an attorney-client relationship, and no result is promised or implied in any description of the arbitration process.
If you believe your losses came from misconduct rather than the market, the firm’s investment loss recovery practice explains the path from review to resolution. Or call (202) 860-1210.
