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.

Ultimate Guide To Understanding the Risks and Legal Recourse for Penny Stocks

Why You Need a Penny Stock Lawyer: Protecting Your Investments from Fraud

Investing in penny stocks can be an alluring prospect due to their low cost and high potential returns. However, these investments come with significant risks and are often the target of fraudulent schemes. At Bakhtiari & Harrison, we represent investors who have suffered losses due to penny stock fraud. Here’s what you need to know about penny stocks and how our experienced penny stocks lawyers can help you protect your investments.

What Are Penny Stocks?

Penny stocks are low-priced securities issued by small-cap companies, typically trading at less than $5 per share. They are not listed on major exchanges like the NYSE or NASDAQ, instead trading over-the-counter (OTC) on platforms such as the OTC Bulletin Board or Pink Sheets. This lack of regulation and transparency makes penny stocks highly speculative and risky investments.

Risks Associated with Penny Stocks

High Volatility: Penny stocks are known for their price volatility. Due to their low market capitalization and trading volume, their prices can swing wildly, often without any fundamental reason.
Lack of Information: Companies issuing penny stocks are not required to disclose as much financial information as those listed on major exchanges. This makes it difficult for investors to make informed decisions.
Liquidity Issues: Penny stocks often have low liquidity, meaning there may not be enough buyers or sellers at any given time. This can make it challenging to execute trades at favorable prices.
Susceptibility to Fraud: Penny stocks are frequently involved in fraudulent schemes, the most common being “pump and dump” schemes. In these schemes, fraudsters artificially inflate the price of a stock through false or misleading statements, then sell off their holdings at the inflated prices, leaving other investors with significant losses.

Legal Protections and Broker Responsibilities

To protect investors, the Securities and Exchange Commission (SEC) has established rules under Section 15(h) of the Securities Exchange Act of 1934. These rules require broker-dealers to:

Approve the customer for the specific penny stock transaction and receive a written agreement from the customer.
Provide the customer with a written disclosure detailing the risks associated with investing in penny stocks.
Disclose the current market quotation for the penny stock.
Disclose the compensation received by the firm and the broker for the transaction.
Provide monthly account statements showing the market value of each penny stock held in the account.

Despite these regulations, many brokers fail to adhere to these rules, leading to significant financial losses for investors.

Penny Stocks Can Be Part of Investor Fraud

Pump and Dump Schemes: Fraudsters create hype around a stock, causing its price to skyrocket. They then sell off their shares at the peak, causing the stock price to plummet and leaving other investors with losses.

Chop Stock Schemes: Brokers purchase stocks for pennies on the dollar and sell them to unsuspecting investors at a significant markup, often with little to no value or liquidity.

Legal Recourse for Penny Stock Fraud Victims

If you have suffered losses due to penny stock fraud, you may be entitled to recover your investment through legal action. At Bakhtiari & Harrison, our experienced securities fraud attorneys can help you:

Evaluate Your Case: We will thoroughly review your investment history and the circumstances surrounding your losses to determine if fraud or negligence occurred.
File a Claim: We will assist you in filing a claim with the appropriate regulatory bodies, such as the SEC or FINRA, and guide you through the arbitration process.
Seek Compensation: Our goal is to help you recover your losses by holding the responsible parties accountable, whether they are brokers, brokerage firms, or other entities involved in the fraud.

Penny Stocks? Why Choose Bakhtiari & Harrison?

Our firm has a proven track record of successfully representing investors in cases of securities fraud, including those involving penny stocks. We understand the complexities of these cases and are committed to providing our clients with the expert legal representation they need to protect their investments and achieve justice.

If you believe you have been a victim of penny stock fraud, don’t hesitate to reach out to Bakhtiari & Harrison for a free consultation. Our team of dedicated penny stocks lawyers is here to help you navigate the legal process and recover your losses. Contact us today to learn more about your rights, FINRA arbitration and legal options. Bakhtiari & Harrison is dedicated to helping investors protect their hard-earned money from fraudulent schemes and negligent brokers. By understanding the risks and knowing your legal options, you can make more informed investment decisions and safeguard your financial future.