Arbitration Procedures

Securities arbitration procedure is governed by a specific set of FINRA rules that only lawyers who specialize in this unique area of law know about. I’m famous for saying that even an experienced trial lawyer would be a fish out of water in a securities arbitration. Not only are there rules unique to FINRA that govern the arbitration, there is an entirely different set of rules that govern the conduct of the brokerage firm and stockbroker. I often make the arbitrators aware in my securities arbitrations that the securities industry is the most highly regulated industry in the United States. That means that there are a host of rules that govern the conduct of these licensed stockbrokers and brokerage firms. Not just FINRA regulations, but SEC rules, and individual state laws.Securities arbitration cases take, on average, a little over a year from the filing date to the Award. Typical court case discovery is not permitted, such as depositions and interrogatories, however, document discovery is allowed and can be very time consuming. Selection of the arbitrators take up a fair amount of time, as well. But the biggest reason that cases take so long to make their way through the system is because of the parties scheduling conflicts. Imagine how hard it is to choose five consecutive days that is free and available for three arbitrators, two or more busy lawyers, the investor and broker and other fact witnesses and two expert witnesses who likewise have busy calendars. It’s not uncommon for everyone to agree on a set of dates only to hear one of the arbitrators say, “Oh, that’s my college reunion that I’m attending,” or some such event. Then the arbitration dates are pushed out another month.The nice thing about a securities arbitration case is that, save for the arbitration itself, everything occurs through email, the Web, or the phone. Even when there is a discovery hearing, usually because the brokerage firm has not produced what it was required to, it takes place in a FINRA conducted conference call between the lawyer on each side of the case and the Chairman of the arbitration panel.Securities arbitration procedures are laxer than court cases and allow for more creativity. I had a case many years ago where I had alerted the other side that I intended to play a portion of the movie Boiler Room in my opening statement. I wanted to play the scene where the poor man was petrified about losing more money and he was cowering under his desk so his wife would not hear and the broker convinced him to invest yet more money into some worthless stock. It was a great scene and it was exactly what had happened to my client in my case! The firm filed a Motion in Limine to try to keep it out. I love it when firms file motions like this, because it’s just an opportunity for me to argue my case to the arbitrators in my Response. The Panel denied the brokerage firm’s motion, thereby giving me free reign to present this portion of the movie at the outset of the case. The case settled for a very nice sum quickly thereafter!

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