Registered investment advisor fraud describes misconduct by an advisory firm that owes clients a fiduciary duty. Claims against an advisory firm usually proceed in court or in arbitration named in the advisory agreement. Claims against a broker-dealer proceed in FINRA arbitration.
Investors assume every dispute with a financial professional lands in the same place. It does not. Registered investment advisor fraud follows a different route than a claim against a stockbroker. The split starts with how your advisor is licensed.
Erez Law, PLLC represents investors across the country against brokerage firms, licensed financial advisors, and investment advisory firms.
Key Takeaways About Broker-Dealer and Registered Investment Advisor Claims
- Broker-dealers and their registered representatives answer in Financial Industry Regulatory Authority (FINRA) arbitration whenever a customer asks for it.
- Investment advisory firms hold no FINRA membership, so their disputes usually proceed in court or in private arbitration set by contract.
- An advisory firm owes its clients a fiduciary duty under the Investment Advisers Act of 1940.
- A broker-dealer owes a best interest obligation that attaches at the moment of a recommendation.
- Two free federal databases reveal which registration your advisor holds.
What Is the Difference Between a Broker-Dealer and a Registered Investment Advisor?
A broker-dealer buys and sells securities for customers and earns money mostly through commissions on transactions.
An advisory firm gives ongoing advice for a fee, often a percentage of the assets it manages. That registration decides the legal duty owed to you and the forum that hears your dispute.
| Feature | Broker-Dealer | Registered Investment Advisor (RIA) |
|---|---|---|
| Primary regulator | U.S. Securities and Exchange Commission (SEC) and FINRA | SEC or a state securities regulator |
| Typical compensation | Commissions tied to each trade | Ongoing fee, often a percentage of assets |
| Legal standard | Regulation Best Interest at the time of a recommendation | Fiduciary duty under the Investment Advisers Act of 1940 |
| Public record | FINRA BrokerCheck | SEC Investment Adviser Public Disclosure, built on Form ADV |
| Where disputes go | FINRA arbitration at the customer’s request | Court, or private arbitration named in the advisory agreement |
| Common job title | Registered representative or stockbroker | Investment adviser representative |
Does the Title on Your Advisor’s Business Card Tell You Anything?
Titles such as “financial advisor,” “wealth manager,” and “financial consultant” carry no fixed legal meaning. The same professional may hold a brokerage registration and an advisory registration at once. The industry calls that “dual registration,” and it settles nothing about your claim by itself.
Account features tell a clearer story than a job title. Look at how the account was billed and who held trading authority.
- A quarterly fee based on account value rather than per-trade commissions
- A written advisory agreement signed at account opening
- A Form ADV brochure delivered to you before or during the relationship
- Discretionary authority permitting trades without your approval
- Statements labeling the account as managed or advisory
Few of those features appear on a pure brokerage account. Where they sit alongside commission charges, the relationship likely ran through both registrations, and a claim may reach both entities.
How Does Erez Law Handle Registered Investment Advisor Fraud Claims?
Erez Law, PLLC represents investors nationwide in claims against brokerage firms, licensed financial advisors, and investment advisory firms.
We identify the right defendant and the right forum before filing, because a misdirected claim burns time you might need. Our attorneys hold more than 65 years of combined experience in securities matters. Founder Jeffrey Erez has practiced in this field for more than two decades.
Where you live does not limit us. We work from Miami and handle investor claims across the United States, and we have recovered more than $400 million for investors. We prepare every matter as though a panel or a judge hears it.
What Do We Look At First in an Advisory Account Claim?
An advisory account claim turns on documents most investors already have in a drawer or an inbox. Five records usually answer the threshold questions.
- The advisory agreement, including any dispute resolution paragraph
- Form ADV disclosures covering fees, conflicts, and disciplinary history
- Account statements showing concentration, fee levels, and trading patterns
- Emails, texts, and notes recording what the advisor actually told you
- Registration records for both the advisor and the firm
Those five documents often reveal a gap between what the firm promised on paper and what happened in the account.
Where Is Your Case Heard: FINRA Arbitration or Court?
A claim against a broker-dealer belongs in FINRA arbitration whenever the customer asks for that forum. A claim against an investment advisory firm belongs in state or federal court, unless the advisory agreement sends it to private arbitration. FINRA membership drives that split, not the size of your loss.
What Does FINRA Arbitration Cover?
FINRA arbitration covers disputes between a customer and a FINRA member firm or one of its associated persons. Under FINRA Rule 12200, members must arbitrate a customer dispute arising from their business activities when the customer requests arbitration or a written agreement requires it.
One arbitrator hears smaller claims, and a three-arbitrator panel hears larger ones. Hearings happen in a city near the customer, which matters to investors who hire counsel outside their home state.
Where Do Registered Investment Advisor Claims Go?
Investment advisory firm claims go wherever the advisory contract sends them, and court is the default. Advisory firms register with the SEC or with a state securities regulator, so FINRA rules do not reach them by default.
Your advisory agreement usually answers the forum question on one page. Read the dispute resolution paragraph closely.
- An arbitration clause naming a private provider such as the American Arbitration Association (AAA) or JAMS
- A venue or governing law clause fixing a particular state
- A waiver of class or group claims
- A fee-shifting provision covering filing and arbitrator costs
- Silence on the subject, which leaves court as the path
What Legal Standard Applies to Your Advisor?
An investment advisory firm owes you a fiduciary duty, the strictest duty in the advice business. A broker-dealer owes a best interest obligation that attaches at the moment of a recommendation. Both standards support investor claims, and each one demands different proof.
What Does the Fiduciary Standard Require?
The fiduciary standard requires an advisor to place your interests ahead of its own throughout the relationship. It combines a duty of care and a duty of loyalty, and it flows from Section 206 of the Investment Advisers Act of 1940, which bars fraudulent and deceptive practices by advisers.
Private damages claims against advisory firms generally rest on state law rather than the Advisers Act itself. Breach of fiduciary duty, breach of contract, negligence, and state securities statutes carry most of that weight.
How Does Regulation Best Interest Apply to Broker-Dealers?
Regulation Best Interest requires a broker-dealer to act in a retail customer’s best interest when making a recommendation. The rule sets four obligations covering disclosure, care, conflicts of interest, and written compliance policies. It applies at the point of a recommendation rather than continuously across the account.
Certain conduct supports a claim under either standard, and our review starts with familiar patterns.
- Undisclosed compensation or revenue sharing tied to a recommended product
- Heavy concentration in a single stock, sector, or illiquid holding
- Recommendations that clash with your stated risk tolerance or income needs
- Trading activity that generates fees without a matching strategy
- Products sold away from the firm’s approved platform
Neither standard promises investment success, and losing money in a falling market is not a case. Both standards demand honest dealing, and the account record usually shows which one broke down.
How Do You Check Whether Your Advisor Is a Broker or an RIA?
Two free federal databases answer that question in minutes. FINRA BrokerCheck reports brokerage registrations, employment history, and disclosure events. The SEC Investment Adviser Public Disclosure system, known as IAPD, reports advisory registrations and Form ADV filings.
Running both searches takes about ten minutes and often reshapes a case before a lawyer sees it.
- Search the advisor’s full name in FINRA BrokerCheck and note every firm listed.
- Search the same name, plus the firm name, in the SEC IAPD system.
- Open Form ADV Part 2 for fee structure, conflicts, and disciplinary history.
- Compare those disclosures against what the advisor told you in writing.
- Save dated copies, because firms amend these filings regularly.
A name appearing in both databases signals dual registration, which sometimes opens two forums at once. That result rewards an early legal read rather than a guess.
What Does a Disciplinary Disclosure Actually Mean?
A disciplinary disclosure records a customer complaint, regulatory action, arbitration award, or termination tied to that professional. Older disclosures reveal patterns, and a pattern strengthens the argument that the firm ignored warning signs it already had. A clean record does not rule out misconduct, since many claims settle quietly.
FAQ for Registered Investment Advisor Fraud
How long do I have to file a claim against my investment advisor?
Do I sue my advisor personally or the firm that employed them?
What does it cost to hire a lawyer for an investment advisory claim?
Does reporting my advisor to the SEC get me a refund?
What happens if my advisor moved to a new firm after the losses?
Take Action on Your Registered Investment Advisor Fraud Claim
Erez Law has represented thousands of investors against brokerage firms and investment advisory firms, and we have recovered more than $400 million. Our attorneys hold more than 65 years of combined experience in securities matters, and we take claims from every state.
We read advisory agreements, Form ADV filings, and account records as a matter of routine, so the forum question rarely takes us long. Founder Jeffrey Erez prepares each matter as though it goes to hearing, and that posture shapes the file from the first phone call.
Call 305-728-3320 and tell us what your advisor sold you. The consultation costs nothing, stays confidential, and reaches a securities attorney rather than a screening service.
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