Strict laws exist in most countries that govern the practices of people who market and sell securities. People who violate securities laws can lose their securities licenses, face fines, and even spend time in jail. Laws in most nations enable people to file a securities lawsuit against a broker or investment firms that has not acted in the clients' best interests, but in most instances there are several preliminary steps to go through before a lawsuit can commence.
Anyone who feels that they have been mislead by an investment firm employee or private broker should first contact that individual or firm and attempt to resolve the situation. If the offending party refuses to settle the matter amicably, the wronged party should contact the individual's direct supervisor or the compliance manager of the firm. Anyone planning to file a securities lawsuit should keep detailed records of all interactions related to the matter, including copies of all emails and letters they send or receive. Many securities related complaints stem from misunderstandings that can be resolved without a securities lawsuit but if the individual or the firm involved refuses to resolve the matter, legal proceedings can commence.
Securities laws in most places require plaintiffs involved in a securities lawsuit to file a formal complaint with the regulatory authority that oversees the individual or the firm involved in the complaint. Regulators in some countries have the power to arbitrate securities related disputes. Arbitration involves a neutral third party investigating the matter and arranging a settlement between both parties to resolve the issue. If arbitration fails to settle the matter or if regulators have no power to arbitrate, the regulators will advise the plaintiff on how to pursue the lawsuit.
Plaintiffs normally have to hire an attorney from a law firm that specializes in securities law. Attorney fees are often expensive, although some attorneys agree to work for no fee upfront in exchange for receiving a percentage of any cash settlement that the plaintiff receives at the conclusion of the case. The plaintiff must provide the attorney with copies of all correspondence and other documents related to the complaint and evidence that securities regulators were informed about the complaint.
Matters related to financial losses that were caused by mismanagement are usually civil matters, whereas situations involving fraud are resolved in criminal court. The securities regulators advise the plaintiff whether to pursue the matter as a civil or criminal matter. In situations involving major firms, attorneys for the plaintiff may publicize the case in order to uncover any other individuals who suffered losses as a result of the same mismanagement and create a class action suit. Criminal prosecutors investigate cases of fraud and attempt to find other individuals or companies that suffered directly or indirectly as a result of the fraud. Depending on the complexity of the case, lawsuits can take months or years to resolve.