Customer Claims Against Brokerage Firms and Individual Brokers, Chicago Securities Lawyer

QUESTION

Where can a customer of a securities or a commodity brokerage firm bring a claim against the firm and his broker?

ANSWER

Typically, when a customer opens an account with a brokerage firm, he signs a Customer Agreement that contains an arbitration clause. Most arbitration clauses state that if a customer wants to bring a claim against his brokerage firm, it must be arbitrated before a forum such as the National Association of Securities Dealers, Inc. ("NASD"), National Futures Association ("NFA"), or New York Stock Exchange ("NYSE"). If the customer has not signed an agreement that includes an arbitration clause, he may file a lawsuit against his brokerage firm and his individual broker in state or federal court, depending on the nature of his claims. If the customer prefers arbitration, he may still bring his claim to any forum where the brokerage firm is a member (e.g., the NASD or NYSE)--whether or not he has signed an agreement with an arbitration clause. This would include claims against the customer's individual broker. Alleged violations of the Commodity Exchange Act may be filed before the Commodity Futures Trading Commission ("CFTC") where they would be heard as reparations claims before an Administrative Law Judge. Usually, a customer will base his complaint on several legal theories (e.g., fraud and breach of fiduciary duty). Because the CFTC will only adjudicate claims under the Commodity Exchange Act many customers prefer the NFA as a forum for their commodities disputes.

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