It depends. Most investment disputes in California are resolved through FINRA arbitration, particularly when the brokerage agreement includes a mandatory arbitration clause. If the financial advisor is not FINRA-registered or the agreement does not require arbitration, then you may pursue a civil lawsuit, provided you have sufficient legal grounds.
When may you have grounds to sue your advisor?
You might have grounds for a claim if your advisor breached their fiduciary duty or engaged in professional negligence. For instance, if your financial advisor recommends highly unsuitable assets that do not match your financial objectives, you may seek damages. In addition, if they trade excessively in your account just to generate commissions, they might be guilty of illegal churning. Misrepresenting risks or making unauthorized trades without your consent also generally constitutes a breach of professional standards.
When is your advisor generally not liable?
You cannot sue your financial advisor just because the market went down and you lost money. Normal market volatility happens. The law does not hold advisors liable for this. However, they must give you accurate disclosures and act in good faith. Ultimately, an advisor is not a guarantor of your portfolio’s performance.
How an attorney may help
Working with an attorney who focuses on professional malpractice cases can help you evaluate your legal path. They could review your account statements, analyze your advisor’s disclosures and determine if a breach occurred. From there, they can then guide you through the complex process of filing a FINRA arbitration claim or a civil lawsuit to pursue the recovery of your lost funds.