High-yield bonds—commonly called junk bonds—carry a deceptively straightforward promise: higher yields in exchange for higher risk. For many retail investors, that promise turns into unexpected losses when their broker recommends these instruments without disclosing the full picture. If you suffered significant losses in high-yield or below-investment-grade bond investments, you may have legal remedies through FINRA arbitration.
Varnavides Law, PC represents investors across California and nationwide in FINRA arbitration proceedings against broker-dealers and investment advisers who failed to meet their legal obligations. Gary Varnavides built his practice on a decade of defense-side experience, giving him the insider perspective on how financial institutions approach these claims—knowledge he now applies exclusively for investors seeking recovery.
This page explains what junk bonds are, how investors are harmed, the legal standards that govern broker conduct, and how to evaluate whether you have a viable claim.
Key Takeaways
- What junk bonds are: Corporate bonds rated below investment-grade (BB+/Ba1 or lower by S&P and Moody’s), offering higher yields but carrying substantially elevated default risk, liquidity risk, call risk, and interest-rate sensitivity.
- How losses happen: Brokers recommend these instruments to investors whose risk profile cannot absorb the volatility, or fail to disclose the risks fully—both are actionable under federal and state securities law.
- Primary legal standard (post-June 30, 2020): Regulation Best Interest (Reg BI), 17 C.F.R. § 240.15l-1, requires broker-dealers to act in a retail customer’s best interest, including a Care Obligation to evaluate the investment in light of the customer’s full investment profile.
- FINRA arbitration is the primary forum: Most retail brokerage accounts include mandatory arbitration clauses. FINRA’s arbitration forum handles these claims under its Customer Code.
- Time window: FINRA’s eligibility rule (Rule 12206) provides a 6-year window from the occurrence or event. Separate federal statutes of limitations apply to § 10(b)/Rule 10b-5 claims.
- Case minimum: Varnavides Law focuses on cases involving $100,000 or more in losses.
What Are Junk Bonds? Understanding the Asset Class
The term “junk bond” refers to corporate bonds rated below investment-grade by the major credit rating agencies. Specifically:
- S&P Global Ratings: BB+ and below (BB+, BB, BB-, B+, B, B-, CCC+, CCC, CCC-, CC, C, D)
- Moody’s Investors Service: Ba1 and below (Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3, Ca, C)
- Fitch Ratings: BB+ and below (following an analogous scale)
The industry prefers the term “high-yield bonds” because it emphasizes the higher coupon rates these instruments offer. The elevated yield is compensation for the elevated risks. Investment-grade bonds (BBB-/Baa3 and above) reflect issuers whose creditworthiness is considered adequate or strong; below-investment-grade issuers carry meaningful default probability.
The Core Risks Retail Investors Often Do Not Fully Appreciate
Default Risk
The issuer may fail to make interest payments or repay principal at maturity. Default rates on high-yield bonds fluctuate with economic cycles and can spike dramatically during credit downturns. Historical data from Moody’s Investors Service tracks annual speculative-grade default rates, which have reached double digits during recession years.
Liquidity Risk
High-yield bonds trade in over-the-counter markets with far thinner liquidity than investment-grade bonds or equities. In stressed markets, bid-ask spreads widen significantly and selling at a reasonable price may be difficult or impossible—trapping investors in positions they cannot exit.
Call Risk
Many high-yield bonds include issuer call provisions allowing the company to redeem the bond before maturity, typically when interest rates fall or the issuer’s credit improves. The investor loses the high-yield income stream precisely when reinvestment opportunities are worst.
Interest-Rate Sensitivity
High-yield bonds have significant duration risk. As market interest rates rise, bond prices fall. An investor holding long-duration high-yield bonds when rates increase can face substantial mark-to-market losses, even before any default occurs.
High-Yield Bond Funds Add Concentration and Expense Risks: Many retail investors access the high-yield market through mutual funds or exchange-traded funds (ETFs) rather than individual bonds. While funds provide diversification, they introduce additional risks: high expense ratios that erode yield, fund-level liquidity mismatches (daily redemption rights against illiquid underlying holdings), and potentially concentrated sector exposures. When a broker recommends a high-yield fund without analyzing these characteristics in the context of a client’s full investment profile, the same legal obligations discussed below apply.
How Investors Suffer Losses: Four Common Harm Patterns
Junk bond losses that give rise to legal claims typically fall into one of four categories.
1. Unsuitable Recommendations
A broker who recommends junk bonds or high-yield bond funds must understand the client’s investment profile—including age, income, net worth, investment objectives, risk tolerance, time horizon, and existing portfolio composition—and must have a reasonable basis to believe the recommendation is appropriate for that specific investor.
Retired investors seeking income preservation, investors with short time horizons, or investors who explicitly communicated conservative risk tolerance are frequently unsuitable candidates for concentrated high-yield bond exposure. When brokers ignore those signals—or worse, fail to elicit the client’s actual profile—and recommend these instruments anyway, the recommendation may be actionable.
2. Misrepresentation and Omission of Material Risks
Securities fraud under § 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)) and SEC Rule 10b-5 (17 C.F.R. § 240.10b-5) prohibits material misstatements and omissions in connection with the purchase or sale of a security. In the junk bond context, common misrepresentations include:
- Characterizing high-yield bonds as “safe income” or “stable investments” without disclosing default and liquidity risks
- Describing the bonds as “just like investment-grade bonds, but with better yield”
- Omitting or minimizing call risk when selling long-duration callable bonds
- Failing to disclose that the broker or firm receives additional compensation (markups, selling concessions, underwriting fees) that creates a conflict of interest
- Misrepresenting credit ratings or the meaning of below-investment-grade ratings
3. Churning in High-Yield Bond Holdings
Churning—excessive trading in a customer’s account primarily to generate commissions for the broker—occurs in high-yield bond accounts when brokers frequently buy and sell bond positions without a legitimate investment rationale. Because high-yield bonds carry significant bid-ask spreads and transaction costs, excessive trading can devastate portfolio returns even when individual trades are in investment-grade instruments. For post-June 30, 2020 retail-customer conduct, churning is analyzed under Reg BI’s Care Obligation (17 C.F.R. § 240.15l-1(a)(2)(ii)), which incorporates the quantitative-suitability concept. For pre-June-30-2020 retail conduct and for non-retail customers, churning continues to be analyzed under FINRA Rule 2111’s quantitative-suitability prong. Churning may also constitute manipulation under FINRA Rule 2020. For more on broker misconduct claims including churning and unauthorized trading, see our broker misconduct practice overview.
4. Concentration Risk / Failure to Diversify
Concentrating a portfolio in high-yield bonds of a single issuer, single sector (e.g., energy, retail, healthcare), or even within a single high-yield fund violates the basic principle of diversification that securities regulations require brokers to apply when making recommendations. A broker who puts 40%, 50%, or more of a retirement account into junk bonds—even if the bonds individually carry some yield rationale—may have violated the broker’s obligation to consider the investor’s overall portfolio context.
Red Flags: Signs Your Broker May Have Acted Improperly
- You were described as a “conservative” or “income-seeking” investor but your account held significant high-yield bond positions
- Your broker emphasized yield and downplayed or omitted any discussion of default risk, liquidity limitations, or call provisions
- Your bond holdings were frequently bought and sold without clear explanation for the changes
- More than 30–40% of your account was concentrated in below-investment-grade securities
- You received account statements showing high turnover, markup charges, or spread costs you were not warned about
- Your broker compared these bonds favorably to investment-grade instruments without a full risk disclosure
The Legal Framework: Standards Governing Broker Conduct
Reg BI — The Controlling Standard for Post-June 2020 Retail Recommendations
Reg BI, codified at 17 C.F.R. § 240.15l-1, became effective June 30, 2020. Under Reg BI, a broker-dealer making a recommendation of a securities transaction or investment strategy involving securities to a retail customer must act in the retail customer’s best interest and may not place its own financial or other interest ahead of the retail customer’s interest.
Reg BI establishes four component obligations:
| Obligation | CFR Citation | What It Requires |
|---|---|---|
| Disclosure Obligation | 17 C.F.R. § 240.15l-1(a)(2)(i) | Disclose material facts about the scope and terms of the relationship, including all material conflicts of interest associated with the recommendation |
| Care Obligation | 17 C.F.R. § 240.15l-1(a)(2)(ii) | Exercise reasonable diligence, care, and skill to understand the potential risks, rewards, and costs of the recommendation and to have a reasonable basis to believe the recommendation is in the best interest of the retail customer based on the customer’s investment profile |
| Conflict of Interest Obligation | 17 C.F.R. § 240.15l-1(a)(2)(iii) | Establish, maintain, and enforce written policies and procedures reasonably designed to: (A) identify and at a minimum disclose, or eliminate, all conflicts of interest; (B) identify and mitigate conflicts of interest that create an incentive for the broker-dealer’s associated person to place its interest ahead of the retail customer’s interest; (C) identify and disclose material limitations placed on the securities or investment strategies that may be recommended and prevent such limitations from causing recommendations not in the retail customer’s best interest; and (D) identify and eliminate any sales contests, sales quotas, bonuses, and non-cash compensation that are based on the sales of specific securities or specific types of securities within a limited period of time |
| Compliance Obligation | 17 C.F.R. § 240.15l-1(a)(2)(iv) | Establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI |
Reg BI Is Not a Fiduciary Standard
Reg BI is a “best interest” standard—it is distinct from the fiduciary duty that applies to investment advisers under the Investment Advisers Act of 1940. The SEC has stated that Reg BI establishes obligations beyond those of the prior suitability standard while stopping short of a full fiduciary relationship. This distinction matters in litigation: Reg BI claims against broker-dealers are analyzed differently from fiduciary duty claims against registered investment advisers. Varnavides Law handles claims against both broker-dealers (Reg BI) and investment advisers (Advisers Act fiduciary duty) in the appropriate forums. Adviser fiduciary-duty claims against investment-adviser-only entities are typically resolved in court or non-FINRA forums (such as AAA or JAMS arbitration), because FINRA’s arbitration jurisdiction generally extends only to FINRA-member broker-dealers and their associated persons.
FINRA Rule 2111 — Suitability (Pre-June 30, 2020 Conduct and Non-Retail Customers)
Before Reg BI’s compliance date of June 30, 2020, broker-dealer recommendations to retail customers were governed by FINRA Rule 2111 (Suitability). FINRA has confirmed, through FINRA Regulatory Notice 20-18 and the official guidance at FINRA Rule 2111 Supplementary Material .08, that Rule 2111 does not apply to recommendations subject to Reg BI—that is, recommendations by broker-dealers to retail customers made on or after June 30, 2020. Rule 2111 continues to apply to non-retail customers and to conduct that predates Reg BI’s compliance date.
Under Rule 2111, a member or associated person must have a reasonable basis to believe that a recommended transaction or investment strategy is suitable for the customer, based on the customer’s investment profile. Rule 2111 identifies three suitability obligations:
- Reasonable-basis suitability: The broker must have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors.
- Customer-specific suitability: The broker must have a reasonable basis to believe that the recommendation is suitable for the specific customer based on that customer’s investment profile.
- Quantitative suitability: A broker who makes a series of recommendations must have a reasonable basis to believe that the transactions are not excessive and unsuitable for the customer’s investment profile when taken together, even if each individual transaction is suitable.
FINRA Rule 2020 — Manipulation and Fraud
FINRA Rule 2020 prohibits members from using any manipulative, deceptive, or other fraudulent device or contrivance in connection with the purchase or sale of any security. This rule reaches misrepresentations made in the course of selling high-yield bonds, including false characterizations of risk, omission of material terms, and deceptive sales practices. Rule 2020 parallels the conduct prohibited by § 10(b) and Rule 10b-5 in the FINRA arbitration context, though the elements of proof differ — FINRA arbitrators evaluating Rule 2020 claims are not bound by the same reliance and loss-causation framework as federal courts.
Section 10(b)/Rule 10b-5 — Federal Securities Fraud
15 U.S.C. § 78j(b) (Exchange Act § 10(b)) and SEC Rule 10b-5 (17 C.F.R. § 240.10b-5) prohibit material misstatements and omissions “in connection with the purchase or sale of any security.” To establish a § 10(b) claim, a plaintiff must prove: (1) a material misrepresentation or omission; (2) scienter (intent to deceive or at least recklessness); (3) a connection with the purchase or sale of a security; (4) reliance; (5) economic loss; and (6) loss causation. See Basic Inc. v. Levinson, 485 U.S. 224 (1988) (information is material if there is a substantial likelihood that disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the “total mix” of information made available); Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005) (loss causation).
In the junk bond context, § 10(b) claims arise when brokers make affirmative misrepresentations about a bond’s creditworthiness, call structure, or liquidity profile, or when they omit material information that a reasonable investor would consider important in deciding whether to purchase or hold the investment.
California State Law Claims
California Corporations Code § 25401 prohibits any person from offering or selling a security in California by means of any written or oral communication that includes an untrue statement of a material fact or omits to state a material fact necessary to make the statements made not misleading. California Corporations Code § 25501 creates a private right of action for violations of § 25401. Unlike § 10(b), § 25401 does not require proof of scienter on its face; however, § 25501 provides sellers a reasonable-care defense, so the practical standard is closer to negligence than strict liability. It remains plaintiff-friendlier than the federal scienter requirement.
Common law claims for breach of fiduciary duty and fraud are also available in California court proceedings, particularly when the relationship between the investor and the financial professional involves the degree of trust and confidence that creates a fiduciary relationship. California common law fraud claims are subject to a 3-year limitations period from discovery under CCP § 338(d) (Cal. Code Civ. Proc. § 338(d), the California Code of Civil Procedure’s fraud-specific limitations period).
Individual Claims vs. Class Actions
Varnavides Law, PC represents individual investors in FINRA arbitration and related proceedings. The firm does not handle class action litigation or mass tort matters. Individual FINRA arbitration is often the faster, more cost-effective, and more favorable forum for investors with substantial losses—awards are typically paid within 30 days of the decision, compared to years of class action litigation with uncertain distributions.
Time Limits: When You Must Act
Time limits in securities fraud cases are not uniform. They depend on the forum, the legal theory, and the facts of each claim. Missing applicable deadlines permanently bars recovery.
FINRA Rule 12206 — The Eligibility Rule (Not a Statute of Limitations)
FINRA Rule 12206(a), found in the Customer Code, establishes that FINRA will not accept a claim for arbitration that is more than six years old at the time of filing, measured from the “occurrence or event giving rise to the claim” (Rule 12206(a) text). This is an eligibility rule—it determines whether FINRA’s arbitration forum is available—not a statute of limitations. The distinction matters because eligibility and legal timeliness are separate questions. A claim can be within an applicable statute of limitations yet still be ineligible for FINRA arbitration under Rule 12206, or vice versa.
Rule 12206(c) preserves the right to file in court if a claim is not eligible for FINRA arbitration, and further provides that filing a statement of claim in FINRA arbitration tolls applicable statutes of limitations for court filing while FINRA retains jurisdiction — protecting claimants who began in arbitration and later need to redirect to court. Accordingly, investors whose claims fall outside the 6-year FINRA eligibility window may still have viable court remedies under applicable statutes of limitations and discovery rules.
Federal Statutes of Limitations
For § 10(b)/Rule 10b-5 claims, the limitations period is set by 28 U.S.C. § 1658(b): the earlier of (1) two years after the discovery of the facts constituting the violation, or (2) five years after the violation. This is a “two-and-five” rule: the “two years from discovery” prong is a limitations period (tolled by discovery), and the “five years from violation” prong is an absolute repose period that cannot be equitably tolled. See Merck & Co. v. Reynolds, 559 U.S. 633 (2010) (interpreting the discovery rule under § 1658(b)).
California Limitations Periods
For Corp. Code § 25501 claims (private actions for violations of Corp. Code § 25401), Corp. Code § 25506(b) provides a limitations period of five years after the act or transaction constituting the violation, or two years after the discovery by the plaintiff of the facts constituting the violation, whichever shall first expire. Common law fraud claims in California courts are governed by CCP § 338(d) (California Code of Civil Procedure § 338(d)), which provides a 3-year limitations period running from the date of discovery of the fraud. Consulting with an attorney promptly after learning of potential fraud is essential to preserve these rights.
| Claim Type | Forum | Time Limit | Key Rule |
|---|---|---|---|
| Unsuitable recommendation / misrepresentation (broker-dealer) | FINRA Arbitration | 6 years from occurrence (eligibility) | FINRA Rule 12206 |
| Federal securities fraud (§ 10(b)/Rule 10b-5) | Federal court | Earlier of 2-year discovery period OR 5-year repose under 28 U.S.C. § 1658(b) | 28 U.S.C. § 1658(b) — 2-year/5-year limitations period |
| California securities law (§ 25401) | California court | Earlier of 5 years from violation OR 2 years from discovery under CA Corp. Code § 25506(b) | CA Corp. Code § 25506(b) |
| Common law fraud / breach of fiduciary duty | California court | 3-year limitations period from discovery (fraud) under CCP § 338(d) (California Code of Civil Procedure § 338(d)) | CCP § 338(d) — 3-year limitations period |
FINRA Arbitration: The Primary Recovery Forum
Most retail brokerage account agreements contain mandatory pre-dispute arbitration clauses requiring that disputes be resolved through FINRA’s arbitration program. Under FINRA’s Customer Code of Arbitration Procedure (FINRA Rule 12200 — scope of arbitration; FINRA Rules 12000 et seq.), investors can bring claims against broker-dealers and their associated persons (registered representatives) for breach of Reg BI’s Care Obligation (17 C.F.R. § 240.15l-1(a)(2)(ii)), violation of FINRA conduct rules, and securities law violations arising from the customer relationship.
How FINRA Arbitration Works
Filing
The investor files a Statement of Claim with FINRA’s arbitration office, describing the facts, legal theories, and damages sought. Filing fees are assessed on a sliding scale based on the amount claimed. Under FINRA Rule 12401, claims of $50,000 or less are heard by a single arbitrator; claims over $50,000 through $100,000 are heard by a single arbitrator unless the parties agree in writing to three; claims over $100,000 are heard by a three-arbitrator panel unless the parties agree in writing to a single arbitrator.
Discovery
The discovery process in FINRA arbitration is more streamlined than federal court litigation. FINRA’s discovery guidelines establish standard document categories that parties must produce. Account records, transaction confirmations, new account forms, account statements, and broker communications are standard production items.
Hearing
Arbitration hearings are typically held at a FINRA regional office nearest to the investor’s residence. Each side presents evidence, examines witnesses, and makes legal arguments before the panel. Expert testimony on damages and broker standards of care is common in high-value cases.
Award
FINRA arbitrators issue awards that may include compensatory damages, interest, attorneys’ fees (in appropriate cases), and costs. Under FINRA Rule 12904, awards are final and binding and are subject to very limited judicial review under the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 et seq.
Enforcement
FINRA arbitration awards against member firms are highly collectible. FINRA Rule 12904(j) requires member firms to pay arbitration awards within 30 days of award service. Failure to pay triggers expedited suspension proceedings under FINRA Rule 9554 — a powerful enforcement mechanism that distinguishes FINRA awards from many other dispute-resolution outcomes.
Damages Available
Investors may seek compensatory damages (principal losses, lost investment returns, interest), disgorgement of commissions and fees generated by the misconduct, and punitive damages in cases of egregious fraud. Attorneys’ fees may be awarded in cases involving specific statutory violations or under applicable fee-shifting provisions.
Evaluating Your Junk Bond Loss Claim
Not every investment loss is actionable. Markets fluctuate, and not all below-investment-grade bond losses reflect broker misconduct. The analysis turns on whether your broker met the applicable legal standard at the time of the recommendation and whether any breach caused your losses.
Key Questions in a Claim Evaluation
- What did your new account documents say? The new account form and customer investment profile established at account opening are critical evidence of what risk tolerance, investment objectives, and financial situation the broker knew or should have known. Discrepancies between what you told the broker and what the form reflects are significant.
- What was disclosed before purchase? Were you provided a prospectus, offering circular, or detailed risk disclosure explaining default risk, liquidity, call provisions, and interest-rate sensitivity? Were those documents explained to you in a way you could reasonably understand?
- What was the concentration level? What percentage of your total portfolio or account was invested in high-yield bonds or funds? Was this consistent with your stated risk tolerance and investment objectives?
- What was the turnover? Frequent buying and selling of bond positions generates transaction costs (markups, markdowns, commissions) that erode returns and may indicate churning.
- Did your losses exceed what market conditions alone would explain? If comparable investors in similar risk-category bonds recovered over the same period while your account did not, that disparity may indicate misconduct beyond general market risk.
- When did the conduct occur? Transactions before June 30, 2020, are analyzed under FINRA Rule 2111 suitability; transactions on or after that date under Reg BI’s Care Obligation.
Why the Insider Perspective Matters in Junk Bond Cases
Gary Varnavides represents investors after spending 10 years at Sichenzia Ross Ference LLP defending broker-dealers in FINRA arbitrations and securities matters. That defense-side background shapes how Varnavides Law approaches investor cases: we know how broker-dealer firms construct their defense arguments, which documentation strategies they rely on, and how they characterize suitability and disclosure decisions. We use that knowledge to anticipate and counter those defenses in FINRA proceedings.
Gary earned his J.D. from Fordham University School of Law in 2010, where he served as Editor-in-Chief of the Fordham Journal of Corporate & Financial Law. He was recognized as a New York Super Lawyers Rising Star (2015–2023, top 2.5% of New York Metro attorneys) and received the IMCA Richard J. Davis Legal/Regulatory/Ethics Award for his publication “The Flawed State of Broker-Dealer Regulation.” He is licensed in California and New York, and Varnavides Law’s FINRA arbitration practice is available nationwide because FINRA arbitration proceedings are not bound by state bar jurisdiction.
What We Analyze at Initial Consultation
- Your account statements and trade confirmations
- New account forms and investment profile documentation
- Communications with your broker or adviser
- Nature and extent of your junk bond exposure
- Applicable time limits and forum considerations
What Clients Value About Our Approach
- Defense-side perspective applied to investor claims
- Deep familiarity with FINRA arbitration procedure and strategy
- Primary-source citation discipline (we cite the rules, not summaries)
- Direct engagement with Gary Varnavides throughout the matter
- California and New York state law expertise alongside federal securities claims
Frequently Asked Questions
What is the difference between a “junk bond” and a “high-yield bond”?
They are the same instrument—bonds rated below investment-grade by S&P (BB+ or lower) and Moody’s (Ba1 or lower). “Junk bond” is the colloquial term reflecting the elevated credit risk; “high-yield bond” is the marketing term emphasizing the higher coupon rate. Financially and legally, the terms describe identical securities.
Does Reg BI apply to my claim, or does the older FINRA Rule 2111 suitability standard apply?
It depends on when the relevant recommendations were made. For broker-dealer recommendations to retail customers on or after June 30, 2020 (Reg BI’s compliance date), Reg BI’s Care Obligation (17 C.F.R. § 240.15l-1(a)(2)(ii)) is the controlling standard. For conduct that predates June 30, 2020, or for recommendations to non-retail customers, FINRA Rule 2111 suitability applies. Per FINRA Regulatory Notice 20-18 and Rule 2111 Supplementary Material .08, Rule 2111 does not apply to retail customer recommendations subject to Reg BI. Both standards can apply in a single case if the misconduct spans both time periods.
Is FINRA Rule 12206 the statute of limitations on my claim?
No. FINRA Rule 12206 is an eligibility rule that determines whether FINRA’s arbitration forum will accept your claim. It provides a 6-year window from the occurrence or event giving rise to the dispute. This is not the same as a statute of limitations: the two measure different things (forum eligibility vs. legal timeliness), and Rule 12206(c) preserves court-filing rights if FINRA eligibility is not met, and further provides that filing a statement of claim in FINRA arbitration tolls applicable statutes of limitations for court filing while FINRA retains jurisdiction. Your claim may also be subject to the federal § 10(b) limitations period (28 U.S.C. § 1658(b): 2 years from discovery / 5 years from violation) and California state law periods, depending on the legal theories asserted.
Can I recover if I signed documents acknowledging the risks of the investment?
Yes, in many cases. Risk-disclosure forms and new account documents do not automatically bar a claim. The key issue is whether the written disclosures were accurate and complete, whether your broker’s oral representations were consistent with those disclosures, and whether the actual investment recommendation was suitable for your specific situation. Brokers and firms sometimes use standardized disclosure language that does not reflect the true risks of particular instruments or a particular customer’s profile. The existence of a signed disclosure form is a defense argument, not a bar to recovery, and is weighed against all other evidence.
What damages can I recover in a FINRA arbitration?
Recoverable damages in FINRA arbitration typically include: (1) compensatory damages—the difference between what you invested and what you received (principal losses), plus interest to restore you to the position you would have been in absent the misconduct; (2) disgorgement of commissions, markups, and fees the broker earned from the improper transactions; (3) attorneys’ fees in appropriate cases; and (4) punitive damages in cases of egregious or willful fraud. FINRA arbitrators have broad discretion in fashioning awards and are not bound by the evidentiary or procedural constraints applicable in court proceedings.
Does Varnavides Law handle cases outside California?
Yes. FINRA arbitration proceedings are not bound by state bar jurisdiction—FINRA Dispute Resolution Services hears cases at regional offices nationwide, and attorney representation in FINRA arbitration is available regardless of where the investor is located. Varnavides Law represents investors across California and nationwide in FINRA arbitration. For claims that require state-court litigation, the firm’s California and New York admissions apply.
What is the minimum loss amount to bring a claim?
Varnavides Law focuses on investor cases involving $100,000 or more in losses in securities matters. This threshold reflects the economic reality of securities litigation: FINRA arbitration involves filing fees, expert witness costs, and attorney time that make smaller claims economically difficult to pursue on a contingency basis. If your losses are below that threshold, the fee structure and economics of the case will be discussed during your consultation.
How does the fee arrangement work?
Varnavides Law handles most investor claims on a contingency fee basis: no upfront attorney fees, and the firm is paid only if it recovers money for you. The fee percentage is discussed during your free consultation. You remain responsible for out-of-pocket case costs (filing fees, expert witnesses, hearing costs), which vary by case. The specific fee arrangement and cost structure are covered at intake so you understand the economics before committing.
Take the Next Step: Schedule a Free Consultation
If you suffered significant losses in junk bonds or high-yield bond funds and believe your broker may not have met the applicable legal standards, an initial consultation with Varnavides Law, PC can help you understand your options. We review account documentation, assess the strength of potential claims, identify applicable time limits, and explain the FINRA arbitration process in plain terms.
The consultation is free, confidential, and without obligation. We focus on cases involving $100,000 or more in losses in securities matters.
Evaluate Your Junk Bond Loss Claim
Varnavides Law, PC represents investors in securities litigation and FINRA arbitration against broker-dealers who failed to meet their legal obligations. Gary Varnavides brings 10 years of defense-side experience to every investor case—knowledge that directly informs how we build and present claims.
Serving investors across California and representing clients nationwide in FINRA arbitration.