FINRA Arbitration

From The Financial Industry Regulatory Authority (FINRA) "The following are keywords and questions that are important in understanding your securities arbitration!"

Arbitration Procedures
What is Arbitration
What Disputes are Eligible for Arbitration?
Who are "The Arbitrators?
Can I be Represented by an Attorney?
How is Arbitration Begun?
What Happens After the Claim is Filed?
Appointment of Arbitrators
Can I Challenge an Arbitrator?
What are Challenges for Cause?
How Do I Prepare for a Hearing?
How are the Hearings Conducted?
How are the Parties Notified of Decisions?
Glossary of Terms 

Arbitration Overview 
Arbitration is an alternative to litigation or mediation in order to resolve a dispute. However, in FINRA securities arbitration, it’s mandatory. The arbitration panels are composed of one or three arbitrators who are selected by the parties. Now, investors have the option of selecting an “All Public” arbitration panel, a great boon for investors. The arbitrators act like a judge or jury when they hear the case – they listen to the arguments of lawyers, study the documentary and/or testimonial evidence, and render a decision. The panel's decision, called an Award is final and binding on all the parties. Arbitration is generally confidential, and documents submitted in arbitration are not publicly-available, unlike court-related filings. However, if an award is issued at the conclusion of the case, FINRA posts the Award in its Arbitration Awards Online Database, which is publicly available.

According to FINRA statistics, arbitrations take roughly one year and three months to complete from the filing of a claim to the issuance of the Award. This time frame can very due to many factors, including the number of witnesses, the amount of documentation, and the scheduling conflicts of the parties, witnesses and arbitrators.

FINRA also provides for expedited proceedings for senior or seriously ill parties, and I have availed myself of this provision numerous times. Not only does it make the arbitrators sensitive to scheduling the arbitration sooner, everything else in the case moves on a faster track – the selection of arbitrators and scheduling the initial conference, for example.

The cost of an securities arbitration case varies. Cost is affected by the amount of the claim, the number of hearing sessions, number of discovery motions, and any postponements. View our fees section for more information.

Eligible Cases 
Arbitration cases are eligible to be heard in FINRA's forum if the following criteria are met:

For disputes with investors:
1. The case is between an investor and a FINRA licensed stockbroker and/or brokerage firms; and
2. The claim is filed within 6 years from the time the events giving rise to the dispute occurred. However, the 6-year date is not necessarily triggered by the date of the investment but can also be triggered by the time of discovery of the wrongdoing or fraudulent concealment of the losses or wrongdoing.

For disputes involving industry parties only:
1. The case is between a FINRA licensed stockbroker suing his brokerage firm or vice a versa or a brokerage firm suing another brokerage firm; and
2. The claim is filed within 6 years from the time the events giving rise to the dispute occurred.

 Required Investor Arbitration 
An investor is required to arbitrate at FINRA if:
1. There is an arbitration clause requiring it in the written agreement;
2. The dispute is with a member of FINRA – either a broker and/or a brokerage firm; or
3. The dispute involves the securities business of the broker and/or brokerage firm.

Required Industry Arbitration 
A broker or a brokerage firm is required to arbitrate at FINRA if:
1. The dispute involves the securities business of a broker and/or a brokerage firm; or
2. The dispute is between members of FINRA, i.e. brokerage firms or brokers

If an investor requests arbitration, a broker or a brokerage firm must arbitrate at FINRA.

Some industry arbitrations are excepted from arbitration, such as employment discrimination, including sexual harassment. Arbitration is allowed only if the parties agree to arbitrate the dispute, either before or after the issue arose.

Exception to required industry arbitration:If you are a broker and your dispute involves an issue of employment discrimination, including sexual harassment, the dispute is not required to be arbitrated unless the parties agreed to arbitrate it, either before or after the issue arose. 

Resolution and Results 
The resolution of arbitration cases vary. Some are decided by the arbitrators; others are resolved by settlement of the parties or through mediation. In a significant number of cases, investors receive monetary or non-monetary relief, either from an award rendered by the panel or a settlement of the parties. For more information on how cases close and how often customers are awarded damages, view our dispute resolution statistics.

Legal Representation
Brokerage firms almost always have legal representation, either in-house, meaning at the brokerage firm or, more commonly, the firm hires outside counsel. It is for this reason, that it behooves an investor to be represented by an attorney. If you cannot afford an attorney, some law schools provide legal representation through securities arbitration clinics. If you neither of these options work, you can file the case pro bono, meaning you represent yourself.

Arbitration Process
View our arbitration process section for a description of the steps required to complete an arbitration.

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