What is FINRA arbitration?

FINRA arbitration is a method of resolving disputes between investors and brokerage firms or financial advisors outside the court system. It involves a neutral third party, an arbitrator, who reviews the case and makes a binding decision.

Why choose arbitration over litigation?

Arbitration is typically faster, less formal, and more cost-effective than litigation. It also provides a final resolution to disputes, with limited grounds for appeal. Most relationships with financial advisors are formalized by entering into a contract which contains a dispute resolution clause. Nationally, most dispute resolution clauses provide for FINRA arbitration.

Who can file a FINRA arbitration claim?

Investors, brokerage firms, and financial advisors can file a FINRA arbitration claim if they have a dispute related to securities or investment activities. FINRA arbitration is normally the forum for disputes among registered persons, brokerage firms and the public customer clients of the firms.

How do I start the FINRA arbitration process?

To start the arbitration process, Bakhtiari & Harrison will file a Statement of Claim with FINRA, detailing the nature of the dispute, the parties involved, and the relief sought.

What is a Statement of Claim?

A Statement of Claim is a written document submitted by the claimant outlining the facts of the dispute, legal claims, and the desired outcome.

What happens after filing the Statement of Claim?

After filing, the respondent has 45 days to answer the Statement of Claim. The answer must address the claims and may include counterclaims or other relief sought.

What fees are involved in FINRA arbitration?

Fees include filing fees, hearing session fees, and possibly member surcharges or process fees, depending on the specifics of the case.

Can I represent myself in FINRA arbitration?

Yes, you can represent yourself, but many choose to hire an attorney with experience in securities arbitration due to the complexity of the process. Investors and industry professionals who choose to represent themselves do so at a substantial disadvantage, Wall Street firms typically retain experienced professional counsel to represent their interests.

How are arbitrators selected?

Arbitrators are selected through the Neutral List Selection System (NLSS), which provides a list of potential arbitrators. Both parties rank and strike names to agree on a panel.

What qualifications do FINRA arbitrators have?

FINRA arbitrators include attorneys, accountants, financial professionals, and public members who have undergone training and meet FINRA’s qualification standards.

How long does the arbitration process take?

The process typically takes 12-18 months from filing to the final award, but this can vary based on case complexity and scheduling. Preference may be given to investors that are seriously ill or elderly.

What is a prehearing conference?

A prehearing conference is a meeting between the parties and the arbitrators to discuss procedural issues, set a schedule, and address preliminary matters including final FINRA arbitration hearing dates.

What is discovery in arbitration?

Discovery is the exchange of documents and information between the parties to prepare for the hearing. It is more limited than in litigation.

What happens during the arbitration hearing?

During the hearing, both sides present evidence, call witnesses, and make arguments. The arbitrators then deliberate and render a decision.

Is the arbitration hearing open to the public?

No, arbitration hearings are private and confidential. Only the parties, their representatives, and the arbitrators may attend.

Can I settle my case before the hearing?

Yes, parties can settle at any time before the arbitrators render a decision, often through negotiation or mediation.

What is mediation in the context of FINRA arbitration?

Mediation is a voluntary process where a neutral mediator helps the parties negotiate a settlement. It is separate from arbitration and non-binding.

What happens if I lose in arbitration?

If you lose, the arbitrator’s decision is final and binding. There are limited grounds for challenging the award in court.

Can I appeal an arbitration decision?

Generally, you cannot appeal an arbitration decision. However, you can seek to vacate the award on very narrow grounds, such as arbitrator misconduct.

What types of disputes are resolved through FINRA arbitration?

Disputes include claims of fraud, breach of fiduciary duty, negligence, breach of contract, and other issues related to securities and investments.

How are damages determined in arbitration?

Damages are determined based on the evidence presented, including financial records, expert testimony, and the specifics of the case.

Can arbitrators award attorney’s fees?

Arbitrators can award attorney’s fees if provided for by law, contract, or if both parties request it.

How do I enforce an arbitration award?

An arbitration award can be enforced in court through a confirmation process, making it a judgment that can be collected.

What is expungement in FINRA arbitration?

Expungement is the process of removing information from a broker’s record on the Central Registration Depository (CRD) system. It is only granted under specific conditions.

What are the grounds for vacating an arbitration award?

Grounds for vacating an award include arbitrator bias, fraud, corruption, or misconduct, as well as exceeding their powers.

Are arbitration awards public?

Yes, arbitration awards are published on FINRA’s website, providing transparency and access to past decisions.

What is the role of the Office of Dispute Resolution?

The Office of Dispute Resolution administers arbitration and mediation cases, ensuring that the process runs smoothly and efficiently.

What is a Simplified Arbitration?

Simplified Arbitration is for cases involving claims of $50,000 or less, allowing for a quicker and less expensive resolution without a hearing.

Can I request an expedited hearing?

Yes, in certain circumstances, such as elderly or seriously ill parties, you can request an expedited hearing.

What is the role of an arbitrator?

An arbitrator acts as a neutral decision-maker, reviewing evidence, hearing testimony, and issuing a binding decision on the dispute.

How do I prepare for an arbitration hearing?

Preparation involves gathering evidence, preparing witnesses, and developing a clear case strategy to present to the arbitrators.

What types of evidence are admissible in arbitration?

Evidence can include documents, emails, financial records, expert reports, and witness testimony, subject to the arbitrators’ discretion.

Can I request documents from the other party?

Yes, through the discovery process, you can request relevant documents and information from the other party to support your case.

How does FINRA handle conflicts of interest with arbitrators?

FINRA requires arbitrators to disclose any potential conflicts of interest, and parties can object to arbitrators they believe are biased.

What happens if a party does not comply with discovery?

If a party does not comply, the other party can file a motion to compel, asking the arbitrators to order compliance and possibly impose sanctions.

What is a motion in arbitration?

A motion is a formal request for the arbitrators to make a ruling on a specific issue, such as compelling discovery or dismissing a claim.

Can I request interim relief in arbitration?

Yes, you can request interim relief, such as temporary restraining orders or injunctions, to preserve the status quo pending the final decision.

How are hearing locations determined?

Hearing locations are typically determined by the location of the claimant unless both parties agree to a different venue.

What is a telephonic or virtual hearing?

Telephonic or virtual hearings are conducted via phone or video conference, allowing parties to participate remotely.

How are arbitration awards paid?

Awards are typically paid by the losing party within 30 days of the decision, unless otherwise specified by the arbitrators.

What if the losing party does not pay the award?

If the losing party does not pay, you can seek enforcement through the courts, turning the award into a legally enforceable judgment.

Are there any limits on the types of claims I can bring in arbitration?

FINRA arbitration covers a broad range of claims related to securities, but there are some statutory and regulatory limits on certain types of claims.

Can I bring a class action in FINRA arbitration?

No, class actions are not permitted in FINRA arbitration. However, you can join other claimants in a single arbitration if the claims are similar.

What is the role of expert witnesses in arbitration?

Expert witnesses can provide specialized knowledge and opinions to help explain complex financial issues to the arbitrators.

How are hearing dates scheduled?

Hearing dates are scheduled based on availability of the parties and arbitrators, with consideration for the complexity of the case.

Can I request a different arbitrator if I believe one is biased?

Yes, you can challenge an arbitrator if you believe they have a conflict of interest or bias that affects their impartiality.

What is a “chairperson” in a FINRA arbitration panel?

The chairperson is the lead arbitrator who manages the procedural aspects of the case and ensures the hearing runs smoothly.

How does FINRA ensure fairness in arbitration?

FINRA has rules and procedures in place to ensure a fair and impartial process, including arbitrator training and disclosure requirements.

How do I learn more about the FINRA arbitration process?

For more information, you can visit FINRA’s website, contact their Office of Dispute Resolution, or consult with experienced attorneys like those at Bakhtiari & Harrison.

How can Bakhtiari & Harrison help with FINRA arbitration?

Bakhtiari & Harrison can assist with filing claims, responding, selecting arbitrators, discovery, hearings, and ensuring the best possible outcome through skilled representation and strategic advice.

National Planning Corporation Investment Lawyer

National Planning Corporation (NPC), formerly based in Santa Monica, California, was a full-service independent broker-dealer and registered investment adviser. Prior to its acquisition, NPC offered a broad range of investment products and advisory services to independent financial professionals and their clients. This review covers the firm’s history, regulatory profile, and key business metrics, with a focus on compliance and client relations.

History of National Planning Corporation

National Planning Corporation was founded in 1979 and operated as part of the National Planning Holdings network, which also included SII Investments, Inc., INVEST Financial Corporation, and Investment Centers of America. NPC served independent advisors nationwide, offering brokerage and advisory platforms. In 2017, the firm and its affiliates were acquired by LPL Financial, resulting in the eventual dissolution of NPC as a standalone entity.

Key Business Metrics

CRD Number

NPC operated under CRD number 29604. This identifier was used by regulatory authorities to monitor its registration, disciplinary history, and disclosure events.

Number of Regulatory Events

Before its acquisition, NPC was involved in multiple regulatory matters. These primarily involved supervisory failures and improper sales practices, prompting regulatory inquiries and enforcement actions.

Number of Employees

NPC supported hundreds of independent financial advisors and a smaller staff of compliance, operations, and support personnel. Its business model emphasized advisor autonomy within a regulated framework.

Assets Under Management (AUM)

NPC managed billions in client assets through its affiliated advisor network, offering a wide array of investment and retirement solutions prior to its merger with LPL.

Revenue

As part of National Planning Holdings, NPC contributed significantly to the network’s revenue through commissions, advisory fees, and product sales before being absorbed into LPL’s infrastructure.

Regulatory and Compliance Landscape

NPC operated under the regulation of FINRA and the SEC. Although it provided compliance support to its independent advisor base, its regulatory history included serious oversight lapses. These compliance failures were a factor in the eventual restructuring and sale to LPL Financial.

Notable Regulatory Issues

NPC faced regulatory proceedings related to:

Supervisory Deficiencies: The firm was cited for inadequate supervision of complex product sales and lack of oversight of independent advisor conduct.
Disclosure Deficiencies: Issues were raised about NPC’s failure to ensure full transparency around commissions, fees, and conflicts of interest.
Fines and Settlements: NPC paid regulatory fines to resolve allegations of unsuitable recommendations and failure to follow supervisory procedures.

These events reflected the inherent compliance risks associated with large, independent broker-dealer networks.

Customer Complaints

Clients of NPC lodged complaints that included:

Unsuitable Recommendations: Investors alleged that advisors recommended inappropriate products for their risk profiles or investment goals.
Alternative Investments: High-commission products, such as non-traded REITs and limited partnerships, were often the subject of disputes.

The firm handled many of these complaints through regulatory settlements, internal reviews, and client arbitration.

Advisor Support and Client Services

NPC offered its affiliated advisors access to an open-architecture platform, investment research, and operational support. The firm emphasized independent practice models, though the lack of centralized oversight occasionally led to compliance challenges.

Clients benefited from a variety of investment and planning tools. However, the firm’s decentralized nature made uniform oversight more difficult, prompting concerns about consistent service quality and regulatory adherence.

Customer Experience and Reputation

NPC had a mixed reputation in the industry. While it was appreciated by advisors for its flexibility and independence, clients and regulators raised concerns about inconsistent compliance and oversight. These challenges contributed to its eventual absorption into a larger, more centralized organization.

Looking Ahead

With NPC no longer operating independently, many of its former advisors and clients transitioned to LPL Financial. The acquisition was part of a broader industry trend toward consolidation, aiming to bring greater consistency and oversight to advisor practices. The legacy of NPC serves as a case study in the balance between advisor independence and regulatory compliance.

Final Thoughts

National Planning Corporation played a significant role in the independent advisory space for several decades. While National Planning’s business model supported advisor autonomy, its compliance shortcomings led to regulatory scrutiny and eventual consolidation. For more information, contact Bakhtiari & Harrison.