FINRA Arbitration: Can I Sue for Punitive Damages?

In general, legal damages are designed to be ‘compensatory’ in nature. This means that victims are entitled to seek a financial recovery that is equivalent in value to the value of their losses. However, there is one glaring exception: Punitive damages.

Unlike compensatory damages, punitive damages are designed to punish the misconduct of the bad-acting party. They are not tied to any specific ‘losses’. Still, when they are awarded, punitive damages go to the victim. Here, our securities fraud attorneys discuss when punitive damages might be awarded in FINRA arbitration cases.

What You Should Know About FINRA Arbitration and Punitive Damages


Most Claims are Resolved Through Arbitration

The vast majority of claims in the securities industry go before FINRA arbitration panels. This is because most investment agreements now contain mandatory arbitration provisions. This has been the state of the industry for decades, since the U.S. Supreme Court held that binding arbitration clauses in securities industry contracts are valid. (R. de Quijas v. Shearson/Am. Exp.)

Punitive Damages Must Be Requested

FINRA Arbitration: Can I Sue for Punitive Damages

As FINRA’s Official Arbitrator’s Guide makes clear, arbitration panels may award punitive damages, but the investor who files the claim has the responsibility to both:

When issuing an award, arbitration panels always must specify precisely what percentage of their total award, in any, is meant to cover ‘punitive’ damages. The main take away here is that investors need to be proactive. Punitive damages will not simply be issued. They must be sought. If you believe that you were wronged in a particularly egregious manner by your broker or broker-dealer, you need to work with a qualified attorney who can help you seek punitive damages.

The Venue Matters

Punitive damages are reserved for cases in which the broker’s conduct was particularly bad. These damages will not be awarded in most cases. While it is an overstatement to call them ‘rare’, punitive damages are far from the norm.

It is also important to note that the standard for awarding punitive damages varies from state to state. In some states, ‘intentional’ or ‘malicious’ conduct is required for punitive damages to be awarded. In other states, punitive damages can be awarded when a broker or brokerage firm engages in conduct that is ‘extremely reckless’ or ‘grossly indifferent’. That latter is a slightly lower, though still high, bar to reach.

Contact Our Team Today

Did you investment advisor intentionally steal money from you? Did they do something that was exceptionally unprofessional? If so, you may be able to sue your financial advisor to obtain punitive damages. To find out what you can recover, you need should seek immediate legal assistance.

Please do not hesitate contact the experienced securities fraud attorneys Sonn Law Group today. Our team will review your claim for free and determine what actions you need to take next. From our offices in Aventura, Miami, Orlando and Houston, we represent investors throughout the United States and around the world.

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