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.

Breach of Fiduciary Duty Lawyers

Breach of fiduciary duty lawyers at Bakhtiari & Harrison represent investors who have suffered financial losses with investment advisors. Investors place significant trust in the professionals who manage their financial affairs, expecting these advisors to uphold a fiduciary duty. This duty, essential in relationships between financial service firms (agents) and their customers (principals), mandates that advisors act primarily in their clients’ best interests. The term “fiduciary duty,” frequently addressed by experienced attorneys, encompasses the ethical and legal obligations required of certain professionals when serving their clients.

What Does a Fiduciary Duty Require?

Fiduciaries, such as attorneys, real estate agents, and trustees, are legally obligated to prioritize their clients’ interests above their own, avoiding self-dealing or any actions that could compromise their clients’ trust. This stringent standard ensures that professionals adhere to the highest levels of integrity and transparency, safeguarding the financial interests of their clients. Investors seeking assurance that their financial advisors are fulfilling these obligations can consult with attorneys who are well-versed in fiduciary duty, to ensure their investments are managed with the utmost care and professionalism.

Investment advisers owe their clients a fiduciary duty which includes the standard duties of care, loyalty, good faith, and disclosure. This means that an investment adviser must:

Use reasonable care when acting on behalf of or advising clients;
Avoid misleading clients;
Seek the best price and terms for each transaction;
Place the client’s interest above his or her own;
Avoid conflicts of interest and fully disclose potential conflicts;
Never use clients’ assets for his or her own benefit; and
Fully disclose any material facts about a transaction.

Courts Impose a Fiduciary Duty on Brokerage and Advisory Firms Managing Client Money

Courts, including those in California have reiterated that the fiduciary nature of the relationship between a stockbroker and customer “imposes on the former the duty to act in the highest good faith toward the customer.”

A fiduciary duty also requires a brokerage firm to comply with industry standards, rules, and regulations. The duty also requires brokerage firms to supervise and monitor the activities of the firm’s employees, perform pre-sale due diligence and after-sale monitoring of investments. The failure to meet the firm’s obligations can be a breach of the firm’s fiduciary duty and result in liability.

Recently, the Securities and Exchange Commission’s Regulation Best Interest known as “Reg BI” imposed a heightened best interest standard on broker-dealers when recommending securities transactions or investment strategies. Broker-dealers were required to begin complying with the regulation on June 30, 2020. Fiduciary duty lawyers at Bakhtiari & Harrison represents clients in FINRA arbitration.

Regulation BI known as The Best Interest Standard

Regulation Best Interest—or Reg. BI—imposes a new standard of conduct specifically for broker-dealers that substantially enhances their obligations beyond the current “suitability” requirements. The Regulation BI standard can be viewed as having two components. First, it establishes a general obligation that draws from key fiduciary principles, requiring broker-dealers to act in the best interest of their retail customers and not place their own interest ahead of the retail customer’s interest. Fiduciary duty lawyers at Bakhtiari & Harrison represents clients in FINRA arbitration where this is a key claim for recovery. Second, it includes specific requirements to address aspects of the broker-dealer relationship where our experience indicated that focused attention was appropriate. Regulation BI is satisfied only if the broker-dealer complies with four specified component obligations: Disclosure, Care, Conflict of Interest, and Compliance. Each of these obligations includes a number of prescriptive requirements, all of which must be satisfied to comply with the rule. Fiduciary duty lawyers will raise these claims and elements of proof with arbitrators.

ERISA Also Imposes Fiduciary Duties on Brokerages and Advisors Managing Client Assets

Wall Street firms may also have statutory fiduciary duties. The most common is codified in The Employee Retirement Income Security Act (ERISA) contains four requirements for 401(k) plan fiduciaries often referred to as the obligation to operate plans for the “exclusive benefit” of the participants. These requirements are the duty of loyalty; the duty of prudence, the duty to diversify investments; and the duty to follow plan documents.

These are some examples of ways a financial adviser can comply with the fiduciary duty. Behavior that places some other interest above the client’s interest may be considered a breach of the fiduciary duty.

Fiduciary Duty Lawyers – Why Choose Bakhtiari & Harrison?

Bakhtiari & Harrison have built a reputation as formidable advocates in the realm of investment fraud. Their comprehensive knowledge of securities law and unwavering commitment to client service position them as a premier choice for individuals seeking legal recourse. Fiduciary duty lawyers at Bakhtiari & Harrison represents clients in FINRA arbitration and in state and federal courthouses nationwide. We will work tirelessly in pursuit of financial compensation for your investment losses, employment claims or regulatory defense.