Particularly serious misconduct may be referred to criminal authorities for prosecution. State securities regulators can also take action against securities violators. Sometimes these actions require violators to return money to defrauded investors. Usually, however, the actions do not help individual investors and the SEC cannot directly intervene in disputes between investors and brokerage firms. Many investors try to recover losses that they believe were caused by inappropriate or illegal activities, either in Federal or state court or through arbitration.
Arbitration is a way to resolve disputes outside of the court system.
It may be less complex, less expensive and less time consuming than the courts. Investors in arbitration are not required to be represented by a lawyer, although many investors hire a lawyer to represent them. Investors without a lawyer should be careful in the proceedings because securities laws can be complicated and confusing. Moreover, industry parties to arbitration are usually represented by an attorney. Even though the SRO staff and arbitrators may try to be helpful to explain the process to investors who do not have a lawyer, they cannot act as an investor's lawyer.