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Legal recourse for stock fraud

People who have been victimized by stock fraud may be eligible for compensation as well as damages through legal action.


Usually disputes between a brokerage and a client are not decided in court but through arbitration. Arbitration is a process in which the two parties agree to have their dispute settled by independent arbitrators chosen by mutual consent. It tends to be much quicker and less expensive than settling in a civil court.

Other reasons for Arbitration

Most brokerage firms have their clients sign a contract that contains an arbitration clause. This usually prevents clients from settling disputes through the courts.

Arbitration compensation versus court compensation

Arbitration hearings are quicker than lawsuits handled in federal or state courts and generally the settlement amounts are the same. The cases below show that large settlements are possible through arbitration.

Kidder Peabody paid out $21.5 million on Oct. 16, 1998

Pompano-Windy City Partners , East Wind Associates paid out $26.0 million on March 14, 1991
Prescott Ball & Turben paid out $38.2 million on May 2, 1990

Refco LLC, Capital Insight Brokerage paid out $43.0 million on June 30, 2001

An undisclosed firm paid out $40.9 million on June 4, 1999
Legal Help

It's imperative that the client seek legal help as soon as fraud is discovered or strongly suspected. Time is of the essence in stock fraud cases. The failure to react to a confirmation order reporting trades that are against the client's expressed wishes may signal tacit consent to an arbitration committee.

The following are the steps an attorney takes in seeking compensation in cases of stock fraud:

1. First the attorney will review the losses in the clients account.
2. Than he or she will consider the losses in light of the overall market health,
3. study the trading activity in the account and commissions charged,
4. evaluate the brokers recommendations to see if they were consistent with the clients needs and objectives,
5. garner expert witnesses and analyze state, federal and professional regulations.

Submit your case for confidential discussion with an attorney.

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