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Investment
Loss
Every year, thousands of hard-working Americans see their
investments, retirement or savings lost-sometimes due to the
unprofessional, negligent or even fraudulent conduct of investment
advisers, brokers, or corporate executives. Almost everybody
in America is familiar with meltdowns on Wall Street. During
the last year the SEC received 82,337 investor complaints
or questions. When misrepresentations, fraud, or incompetence
occurs at the hands of stockbrokers, financial planners, or
executives the result can regrettably be a dramatic loss of
life savings, inheritance or retirement plan assets.
Enron and other corporate and investment debacles are tragic,
and many Americans have felt their sting. Innocent investors
have been betrayed by our system of disclosure and accounting.
Most tragic are the investors who entrusted some portion of
their life savings to a company that seemed to be profitable
or an advisor seeming to be honest and capable, placing their
trust in those people and organizations. Too often have people
also been betrayed by events are like Enron or WorldCom in
their retirement accounts and made life-altering decisions
based upon a stock's perceived value or the recommendation
of a trusted advisors.
Investors may be able to recover losses from stockbrokers,
investment advisors, financial planners and corporations that
have engaged in negligence, fraud, misrepresentation, unsuitable
recommendations or recommendations (or portfolio unsuitability),
unauthorized investments or trades, excessive trading (churning),
failure to follow instructions, improper management or other
misconduct.
NASD
Arbitration & Mediation
Investors
who have been wronged may seek recovery with the the National
Association of Securities Dealers (NASD). The NASD is a private-sector,
not-for-profit organization, that provides financial regulatory
services for the securities industry. The NASD registers member
firms, writes rules to govern their behavior, and examines
them for compliance and disciplines those that fail to comply.
The NASD provides education to industry professionals and
investors. Roughly 5,300 brokerage firms, over 92,000 branch
offices and more than 664,000 registered securities representatives
come under the NASD's jurisdiction.
The NASD operates
the largest securities dispute resolution forum in the world,
handling nearly 1,000 mediations and 7,000 arbitrations each
year. It's goal is to provide investors and their securities
firms a fair, expedient, and cost effective alternative to
costly and lengthy litigation.
In cases brought
by investors, arbitrators awarded damages in 2002 totaling
$139 million, $23 million of which was for punitive damages,
compared to $97 million and $15 million, respectively, in
2001. As in prior years, approximately 60 percent of all claims
were resolved between the parties before reaching an arbitration
award.
In 2002
the mediation forum closed 1,360 cases with 82 percent of
the cases reaching a settlement. In the past seven years,
parties have used the mediation process in almost 7,500 cases
with 79 percent resulting in an agreement between the parties.
Mediation
Mediation
is a voluntary, non-binding dispute resolution process in
which a trained, impartial individual (the mediator) helps
participants negotiate and reach a settlement. The mediation
process is unique in that there are no "winners"
or "losers." Unlike an arbitrator or a judge, the
mediator does not impose a solution on the parties, but rather
assist assists the parties in forming and accepting a solution
that is acceptable to all. The mediator accomplishes this
by helping the parties remain clam and focused during discussions,
by clarifying issues and positions, by helping each party
understand the other party’s position, and by pointing
out the strengths and weaknesses of each side’s position.
Mediation is very flexible. Parties choose the mediator, the
method of mediation, and when the mediation will take place.
In some cases, the parties may opt for a face to face discussion
with the mediator presiding. In other cases the parties may
choose to hold private meetings with the mediator acting as
an intermediary and carrying messages, proposals, questions,
offers and counteroffers to either party.
Arbitration
Arbitration
is a dispute resolution process to help determine if aggrieved
parties are entitled to recover damages. Parties are usually
represented by lawyers. In arbitration, extensive discovery
and evidentiary hearings are conducted, and parties testify
under oath. An impartial person or panel, selected by the
parties, hears all sides of the issues as presented, studies
the evidence, and then decides how the matter should be resolved
and renders an award. Arbitration awards are final and binding,
subject to review by a court only on a very limited basis.
Both mediation and arbitration benefit parties by providing
prompt, inexpensive alternatives to litigation in the courts.
Parties can choose NASD arbitrators and mediators who are
carefully selected from a broad cross-section of people, diverse
in culture, profession, and background. If you have a dispute,
you should first carefully consider mediation as it is often
an easier, quicker, and less costly process.
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