You can sue your financial advisor for losing money, but only when the loss came from something the advisor did wrong rather than from the market itself. A diversified portfolio that falls during a downturn is investing working as intended, and no legal claim will recover those losses. A claim becomes viable when the advisor broke a professional duty: recommending investments that didn’t fit your situation, trading without permission, hiding risks, churning your account for commissions, or outright fraud. And in most cases you won’t actually file in court. Brokerage account agreements almost always route disputes into FINRA arbitration instead.
When Losses Are the Advisor’s Fault
The dividing line is conduct, not outcome. Markets fall, sectors collapse, and sound portfolios lose value. None of that is actionable. What is actionable is a specific breach of duty that caused specific harm to your account.
A few theories do most of the work in these cases, and strong claims often combine more than one.
Breach of fiduciary duty. Registered Investment Advisers owe clients a duty of care and a duty of loyalty under the Investment Advisers Act of 1940.1Securities and Exchange Commission. Commission Interpretation Regarding Standard of Conduct for Investment Advisers Steering you into a product that pays the advisor more while a cheaper, better option exists is a textbook breach.
Unsuitable recommendations. Even when a broker isn’t a full fiduciary, the SEC’s Regulation Best Interest requires that each recommendation have a reasonable basis in the customer’s investment profile, including age, finances, goals, risk tolerance, and time horizon.2eCFR. 17 CFR 240.15l-1 – Regulation Best Interest Loading a retiree’s account with speculative stocks fails that standard.
Churning. FINRA’s quantitative suitability obligation addresses excessive trading. When a broker effectively controls the account, their series of trades, taken together, must not be excessive. Turnover rates above six create a presumption of churning, and cost-to-equity ratios above 12 are treated as strong evidence.3FINRA.org. FINRA Rule 2111 (Suitability) FAQ The math either supports a claim or it doesn’t.
Misrepresentation and omission. If the advisor told you something false about an investment, or left out something material like a conflict of interest, high fees, or illiquidity, and you relied on that in deciding to invest, you have a claim.
Unauthorized trading. Unless you signed a written discretionary agreement giving the broker authority to trade without checking with you, each trade executed without your permission is a separate violation.
Fraud. Fictitious investments, forged documents, stolen funds, and Ponzi schemes all qualify. Proving intent to deceive is harder than proving negligence, but fraud opens the door to punitive damages and criminal referrals.
Negligence. No bad intent required. If the advisor failed to meet the standard of care a competent professional would exercise, whether by skipping research, failing to monitor the account as promised, or botching an execution, and that failure caused your losses, you can pursue it.
Watch the Clock
Deadlines kill a lot of otherwise valid claims. FINRA’s arbitration code bars any claim where more than six years have passed since the event that caused it, and FINRA applies that eligibility rule strictly.4FINRA.org. 12206 – Time Limits The clock starts at the misconduct or the transaction, not when you figured out something was wrong.
State statutes of limitations also apply and can be shorter. Many states give you two to four years for fraud and negligence claims. Some run from the date of the misconduct; others use a discovery rule that starts when you knew or should have known about the problem. If you suspect something is off, don’t wait a few months to see if the account recovers. That delay can be the difference between a case and no case.
Build Your Case Before You Call a Lawyer
Before paying for an attorney consultation, run a free check on your advisor. FINRA’s BrokerCheck provides reports on any registered broker or brokerage firm, including customer disputes, regulatory actions, certain criminal matters, and financial disclosures. Reports cover the last 10 years of registration, and serious items like final regulatory actions and criminal convictions stay on the record permanently.5FINRA.org. About BrokerCheck A pattern of prior complaints strengthens your position significantly.
Review the Form CRS your advisor was required to hand you at the start of the relationship. That SEC-mandated disclosure must identify any legal or disciplinary history at the firm or with its professionals, and must describe the fees you’ll pay and the conflicts those fees create.6Securities and Exchange Commission. Form CRS Item Instructions If you never got the form, or if required disclosures were missing, that’s its own evidence of noncompliance.
Then gather your paper trail. Cases rise and fall on documentation.
- Your client agreement or contract, which defines the advisor’s duties and almost always contains the arbitration clause.
- Every monthly or quarterly account statement showing transactions, positions, fees, and performance.
- Trade confirmations for individual transactions.
- Emails, letters, texts, and portal messages where the advisor said anything about risk, returns, or strategy.
- Any contemporaneous notes you kept from meetings and calls, with dates.
- Marketing materials and prospectuses the advisor gave you, especially anything that soft-pedaled risk or oversold returns.
- The BrokerCheck report.
Put it all in chronological order. An attorney evaluating the case wants a clean timeline tying specific conduct to specific losses.
Arbitration, Not Court
If you opened a brokerage account, you almost certainly signed a predispute arbitration agreement, which means a traditional lawsuit isn’t on the table. FINRA arbitration is the primary forum for investor-broker disputes in the United States.7FINRA.org. Arbitration and Mediation
You start by filing a Statement of Claim with FINRA and paying a filing fee that scales with the amount at issue. The advisor and firm have 45 days to answer.8FINRA.org. 12303 – Answering the Statement of Claim Claims under $100,000 go to a single arbitrator; larger claims go before a three-person panel. After document exchange and a hearing, the panel aims to issue its award within 30 business days of the hearing record closing.9FINRA.org. 12904 – Awards That award binds both sides, and the grounds to appeal it are very narrow.
FINRA also offers voluntary mediation, where a neutral helps you and the advisor negotiate. Nothing is imposed, nothing settles without mutual agreement, and mediation can run alongside a pending arbitration without giving up your right to a hearing.
Court is sometimes still available. If your advisor is a standalone Registered Investment Adviser with no broker-dealer affiliation, your agreement may not require arbitration, and a civil suit in state or federal court may be possible. Court cases typically offer broader discovery and the possibility of a jury but tend to be slower and more expensive. An attorney reading your client agreement can tell you which forum applies.
What It Costs and What You Can Win
Most securities attorneys take investor cases on contingency, roughly one-third of any recovery, with the exact figure varying by attorney and case complexity. If you recover nothing, you typically owe no attorney fees. That structure makes it possible to pursue a legitimate case after you’ve already lost money.
You will face FINRA filing fees that scale with claim size, and parties who can show financial hardship can request a waiver.7FINRA.org. Arbitration and Mediation Expert witnesses, document production, and travel can add to the bill. On smaller claims, those costs matter, and the economics are worth a candid conversation with counsel before filing.
Recovery is usually compensatory: an amount meant to put you back where you’d have been without the misconduct, often with prejudgment interest added. In egregious cases involving fraud or willful misconduct, arbitrators can award punitive damages, and some panels also award attorneys’ fees when the conduct was especially bad or a statute or contract provision allows it.
Realistic Odds of Winning
FINRA’s own numbers give a useful reality check. In 2025, customers received damage awards in roughly 28% of all arbitration cases decided on the merits, and about 33% of cases that went to a full hearing.10FINRA.org. 2025 Dispute Resolution Statistics Those figures understate the picture, because most cases never reach a final hearing. In 2024, 84% of customer arbitration cases closed through settlement or paid damages before any award issued.7FINRA.org. Arbitration and Mediation
A well-documented claim with a credible legal theory puts real pressure on the firm to settle. Brokerages have reputational and regulatory reasons to resolve meritorious cases quietly rather than let a panel issue public findings. If your records are clean, the breach is provable, and the damages are quantifiable, your odds look better than the raw win-rate numbers alone suggest.