Class-action suits and arbitration are the two weapons investors use most often in seeking restitution from brokerage firms. Arbitration, where investors win more than half the time, is generally faster. Although investors normally sign an agreement stipulating that any dispute with their broker must be decided in arbitration, such disputes can become the subject of class action suits. This happens when the courts agree that a large number of investors were allegedly wronged in the same manner, when the investors lack the resource to pursue restitution on an individual basis, and when the most expeditious way to handle their claims is on a consolidated, not individual basis.
Arbitration is often the best route for investors. The most common area of dispute in arbitration cases is the suitability of investments a broker sells to a customer. Each year, more than 5,000 disgruntled investors file arbitration claims with the NASD, the NYSE, or other similar organizations. The NASD arbitration department handles roughly 80% of all the customer/broker-dealer disputes in the U.S., so the NASD would be a good starting point for any consumer considering arbitration as an option for resolving a problem ar dispute.
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