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.

FINRA Rules: Allegations of Selling Away

Have you ever heard of selling away? It’s something that can get financial advisors in big trouble with FINRA, the Financial Industry Regulatory Authority. This article will explain what selling away is, why it’s a problem, and what the consequences can be. We’ll also review some important FINRA rules you need to know about to avoid any issues.

What is FINRA?

FINRA is a big organization that looks over how brokers and financial advisors do their jobs. They make sure everyone is playing by the rules to protect investors and keep the market fair.

What are Private Securities Transactions?

Private securities transactions involve investments not made through the usual channels, like the stock market. Instead, they are done privately, often involving friends, family, or close connections.

Why Does FINRA Investigate Selling Away?

Selling away happens when a financial advisor sells private securities without telling their employer. FINRA investigates this because it can lead to big problems, like fraud or bad investments that hurt people’s savings.

What are the Consequences of Violating FINRA Rules 3280 and 2010?

If you break these rules, you can face serious penalties. This includes fines, getting suspended, or even losing your job. It’s really important to follow these rules to avoid getting into trouble.

Understanding FINRA Rules 3280 and 2010

Overview of FINRA Rule 3280: This rule requires financial advisors to get written approval from their firm before engaging in any private securities transactions.
Overview of FINRA Rule 2010: This rule says that all financial advisors must act with honesty and integrity in their professional conduct.

These rules are in place to protect investors and make sure that all financial transactions are conducted properly.

What is Selling Away?

Selling away is when a financial advisor makes private securities transactions without telling their employer. Here are some examples:

Selling shares in a private company to friends or family without approval.
Offering investment opportunities that are not part of the advisor’s regular business.

Why Selling Away is Prohibited by FINRA

Selling away is banned because it can be very risky. Without the firm’s knowledge, there’s no way to make sure the investment is safe or suitable for the client. This can lead to big losses and hurt an advisor’s reputation.

How Selling Away Can Harm Investors

When an advisor sells away, the investor may not get all the information they need to make a good decision. This can result in losing money or falling victim to fraud.

How Selling Away Can Harm a Financial Advisor’s Reputation

If a financial advisor gets caught selling away, it can damage their career. They might get fined, suspended, or even banned from the industry. This can ruin their reputation and make it hard to find work in the future.

How FINRA Investigates Selling Away

The Role of FINRA: FINRA’s job is to keep the financial industry safe and fair. They investigate any reports of selling away to protect investors.
How FINRA Receives Information: FINRA can get tips from other brokers, clients, or through regular checks.
Steps of a FINRA Investigation:
- FINRA starts by looking into the tip or complaint.
- They gather evidence and talk to everyone involved.
- FINRA decides if there was a violation and what the consequences should be.
Potential Outcomes: The outcomes can range from warnings to severe penalties like fines or suspension.

Tips for Avoiding Selling Away Violations

Educate Yourself on FINRA Rules 3280 and 2010: Know the rules inside and out.
Understand the Consequences: Know what can happen if you break the rules.
Maintain Clear Communication with Your Employer: Always keep your firm in the loop.
Properly Document All Private Securities Transactions: Make sure everything is recorded and approved.
Seek Guidance from a Compliance Officer or Legal Counsel: Get help if you’re unsure about anything.

Following FINRA Rules 3280 and 2010 is crucial for staying out of trouble. If FINRA ever investigates you, know what to expect and how to handle it. Remember, selling away can hurt not just your clients, but also your career. Stay informed, follow the rules, and always act with integrity.

By understanding and following these guidelines, financial advisors can protect themselves and their clients, ensuring a fair and safe financial market for everyone.

Bakhtiari & Harrison – Experienced Attorneys

Navigating the complexities of FINRA rules and avoiding disciplinary actions can be challenging. This is where Bakhtiari & Harrison come in. As experienced FINRA regulatory defense lawyers, they specialize in helping stockbrokers and financial firms manage compliance issues and defend against disciplinary actions.

With a deep understanding of FINRA rules and a proven track record of success, Bakhtiari & Harrison can provide the guidance and representation you need to protect your career and reputation. Whether you are facing an investigation or looking to strengthen your compliance program, their expert legal services are invaluable.