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.

Why Does FINRA Bar Brokers? Ultimate Guide To Understanding the Consequences of Misconduct

Why does FINRA bar brokers or financial advisors? The Financial Industry Regulatory Authority (FINRA) is a critical player in maintaining trust in the U.S. financial system. One of FINRA’s main jobs is to watch over brokers and brokerage firms and sometimes taking regulatory action FINRA bars brokers.

Why does FINRA bar brokers?

This helps make sure they follow the rules that protect investors. When brokers fail to meet these standards, they can face serious penalties, including a ban from the industry. But why does FINRA bar brokers, and what does it mean for investors?

At Bakhtiari & Harrison, we help investors understand the importance of regulatory actions. We explain how these actions can affect your investments. Let’s break down the reasons FINRA bars brokers and how it safeguards the interests of investors.

What Does Being Barred by FINRA Mean?

When FINRA bars a broker, they cannot work in the securities industry again. This ban is permanent. This is one of the most severe actions FINRA can take against a broker. A barred broker cannot take part in any financial activities. This includes selling securities or giving investment advice.

Why does FINRA bar brokers? FINRA aims to protect investors by removing brokers who break rules. This ensures that only qualified and ethical professionals stay in the industry. But what kind of behavior leads to FINRA barring brokers?

Why does FINRA bar brokers? 6 Reasons

Brokers can be banned for many reasons. Most of these reasons involve unethical practices, fraud, and not following industry rules. Some of the common reasons include:

Fraudulent Activity: Engaging in fraud, such as misrepresentation of investment opportunities or misleading clients about the risks involved, is a serious offense. Fraudulent actions can severely harm investors and shake confidence in the market. Under FINRA Rule 2020, brokers cannot use tricks, lies, or fraud when dealing with clients. This can be why FINRA bars brokers.
Unauthorized Trading: Brokers must always get permission from their clients before making trades on their behalf. Unauthorized trading occurs when a broker buys or sells securities without the investor’s consent. This breaks FINRA Rule 2010. This rule requires brokers to follow high standards of honesty and fair trading practices.
Misappropriation of Funds: Brokers have a fiduciary duty to act in the best interests of their clients. If they misuse or steal client funds for personal gain, FINRA may bar them. This type of misconduct violates FINRA Rule 2150, which prohibits brokers from making improper use of customer securities or funds.
Fiduciary Duty: Brokers must act in their clients’ best interests. They must also reveal any conflicts of interest that could impact their advice. If they fail to do so, it could lead to disciplinary action, including being barred.
Churning is when a broker makes too many trades in a client’s account. This is done to earn more commissions. This unethical practice violates FINRA Rule 2111 and can lead to significant financial harm to investors.
Failure to Cooperate with Investigations: If FINRA is investigating potential misconduct, brokers are required to provide information and cooperate fully. Brokers must cooperate with investigations under FINRA Rule 8210. If they do not cooperate or provide false information, they can be banned from the industry.

Why does FINRA bar brokers? Real-World Examples of FINRA Barring Brokers

To understand how these rules are enforced, let’s look at some real-world examples. Why does FINRA bar brokers? In a recent case, FINRA banned a broker for stealing client funds for personal use. Why does FINRA bar brokers? The broker had engaged in unauthorized trading and failed to disclose conflicts of interest, leading to significant investor losses.

In another case, a broker was barred for engaging in a Ponzi scheme, defrauding investors of millions of dollars. These cases show how serious FINRA’s enforcement actions are. They also stress the need to bar brokers who do not follow ethical standards.

For more examples, you can explore FINRA’s Disciplinary Actions Online, where enforcement cases are made publicly available.

How Bakhtiari & Harrison Can Help

Why does FINRA bar brokers? If a barred broker has affected you or if you think your broker has done something wrong, you can seek compensation for your losses. At Bakhtiari & Harrison, we help investors navigate the complex legal process to hold brokers accountable for their actions.

Our team understands the impact that financial misconduct can have on your life. We are here to guide you through your options, whether it involves filing a claim with FINRA or pursuing legal action. Protecting your investments is our top priority, and we’re ready to help you recover what you’ve lost.

Don’t wait to take action if you believe your broker has violated FINRA rules. The sooner you address the issue, the better your chances of recovering your losses. Bakhtiari & Harrison is here to provide you with the information and support you need. When FINRA bars brokers investors and thier counsel should take note and action.

Contact us today to set up a consultation. Learn more about your legal options for holding a broker accountable for misconduct.