Stockbrokers can be called to account Redress: Although arbitration has some drawbacks, it is faster and cheaper than using the court system for those who believe their brokers are at fault.


Many of the letters I receive describe disasters, a large number of which involve stockbrokers. This is not necessarily an indictment of all brokers but rather an indication that people don't usually take pen in hand to write about their investment successes.

Nonetheless, those who have been wronged need answers -- clear, simple answers. So, here goes:

Assuming that you've exhausted the regular channels brokerage firms provide -- branch manager, complaint personnel, consumer relations and legal (compliance) department -- there are still two avenues open to you: litigation in a civil court and arbitration.

Arbitration is faster and cheaper than the court system. But there are two potential drawbacks to arbitration:

1. Decisions by arbitration cannot be appealed in court except under very limited conditions, such as prejudice or fraud.

2. Punitive damages are generally not awarded in arbitration proceedings.

Arbitration panels handle a wide range of complaints: excessive trading (also called "churning"), unsuitable investments, unauthorized trades, trades that are inappropriately executed and misrepresentation of facts (lying, in plain language).

The last category, misrepresentation of facts, is a popular complaint but often difficult to prove. The most successful arbitrations (to the consumer, of course) usually involve the first two complaints, churning and unsuitable investments.

Arbitration proceedings are sponsored by the major stock exchanges. In general, you should use the arbitration facilities of the exchange where the investment occurred or the where the security is listed.

The National Association of Securities Dealers (NASD) conducts hearings in 46 cities nationwide and will try to hold the arbitration proceedings as close to the complainant as possible.

To request the necessary forms to file a claim through NASD, write to: Arbitration Department, NASD, 33 Whitehall St., New York, N.Y., 10004, or you may call (212) 858-4400.

Complaints for amounts less than $10,000 can be arbitrated directly through a written complaint; they do not require a physical appearance.

The New York Stock Exchange (NYSE) usually holds proceedings in the New York area but will consider requests for hearings in more than 35 major cities.

Complaints under $10,000 can be arbitrated by mail. To get the necessary forms for filing your complaint, write to: NYSE, Department of Arbitration, 20 Broad St., New York, N.Y., 10005. Please do not call to ask for the forms.

To use the arbitration facilities of the American Stock Exchange (AMEX), first send for a package that fully explains the steps to take. Write to: Janice Stroughter, Director of Hearings, AMEX, 86 Trinity Place, New York, N.Y., 10006, or call (212) 306-1414. Although the AMEX holds most of its hearings in New York, it will consider requests for going out of town, especially if both complainant and witnesses live far from the Big Apple.

The procedures for filing a complaint vary from exchange to exchange, but the arbitration proceedings themselves follow similar principles.

Arbitration may take a year to complete, but the complainant generally doesn't spend more than a day or two testifying. (By comparison, court proceedings are much more time-consuming and can take years.)

You don't need to be represented by a lawyer at arbitration, but I strongly recommend that you retain one. It is a foregone conclusion that your adversary will have a least one attorney on hand.

Susan Bondy founded her namesake financial services company in 1980 to provide financial planning and asset management. She is the author of "How to Make Money Using Other People's Money." Write to Susan Bondy in care of The Sun, 501 N. Calvert St., Baltimore, Md. 21278. All letters will be treated confidentially.

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