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.

Mutual Securities, Inc. Investment Lawyer

Mutual Securities, Inc. is an independent broker-dealer and registered investment adviser (RIA) based in Camarillo, California. Known for its focus on providing personalized financial solutions, Mutual Securities supports a network of financial advisors who cater to individual and institutional clients. This blog examines the firm’s history, regulatory profile, and key business metrics, with particular attention to its compliance and customer relations.

History of Mutual Securities, Inc.

Founded in 1982, Mutual Securities, Inc. was established to provide financial advisors with a platform that emphasizes independence and flexibility. Over the years, the firm has grown steadily, offering a range of services including brokerage, financial planning, and access to alternative investments. While Mutual Securities has maintained a reputation for personalized service, it has also faced challenges related to regulatory compliance and customer satisfaction.

Key Business Metrics

CRD Number

Mutual Securities, Inc. is registered under CRD number 13092. This identifier is used by regulatory bodies to track the firm’s compliance and registration history.

Number of Regulatory Events

According to BrokerCheck and the firm’s CRD record, Mutual Securities, Inc. has been involved in over 10 regulatory events. These events primarily involve supervisory deficiencies, compliance lapses, and disclosure issues. Regulatory findings have pointed to areas where the firm needs to enhance oversight and improve adherence to industry standards.

Number of Employees

Mutual Securities employs approximately 150 professionals who provide compliance, operational, and administrative support to its network of financial advisors.

Assets Under Management (AUM)

Mutual Securities oversees approximately $5 billion in assets under management (AUM) as of 2023. This reflects the firm’s ability to attract and retain financial advisors and clients seeking personalized financial solutions.

Revenue

The firm generates approximately $50 million in annual revenue through its brokerage services, advisory platforms, and other financial offerings.

Regulatory and Compliance Landscape

Mutual Securities operates under the oversight of the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC). While the firm has taken steps to address compliance shortcomings, its regulatory history highlights recurring issues that warrant continued attention.

Notable Regulatory Issues

Mutual Securities has faced several regulatory actions, including:

Supervisory Deficiencies: The firm has been cited for failing to adequately supervise its representatives, particularly regarding the sale of complex financial products and alternative investments.
Inadequate Disclosures: Regulatory findings have noted instances where the firm did not provide sufficient disclosures about fees and potential conflicts of interest.
Fines and Settlements: Mutual Securities has paid fines to regulatory bodies for compliance violations, reflecting the need for ongoing improvements in its supervisory framework.

These regulatory challenges underscore the importance of robust oversight and transparent practices in the firm’s operations.

Customer Complaints

Customer complaints against Mutual Securities often involve allegations of unsuitable investment recommendations, fee transparency issues, and inadequate communication.

Complex Products: A significant number of complaints pertain to the sale of alternative investments, such as non-traded REITs, to clients who may not fully understand the associated risks.
Fee Disclosure: Some clients have raised concerns about insufficient explanations of fees, leading to dissatisfaction and disputes.

The firm addresses these complaints through arbitration and mediation, but the frequency of such issues indicates the need for systemic improvements.

Advisor Support and Client Services

Mutual Securities provides its financial advisors with a range of resources to manage their practices, including technology platforms, compliance assistance, and marketing support. While the firm emphasizes personalized service, its regulatory and customer complaint history suggests areas where additional investment in advisor training and oversight could improve outcomes.

Clients benefit from tailored financial strategies, but greater transparency and enhanced communication could further strengthen their experience.

Customer Experience and Reputation

Mutual Securities has cultivated a loyal network of advisors and clients, but its reputation has been impacted by regulatory actions and customer complaints. Prospective clients and advisors are encouraged to carefully review the firm’s regulatory history and ensure that its offerings align with their financial goals and expectations.

Looking Ahead

Mutual Securities faces ongoing challenges in improving its compliance infrastructure and addressing client concerns. The firm’s ability to regain trust and strengthen its reputation will depend on its commitment to transparency, oversight, and client satisfaction.

Final Thoughts

Mutual Securities, Inc. has a long-standing presence in the financial services industry, but its track record includes notable regulatory and customer-related challenges. While the firm provides a platform for financial advisors and offers a range of investment solutions, areas for improvement remain in its compliance practices and communication.

For potential advisors and clients, conducting thorough due diligence is essential. Understanding the firm’s regulatory history and evaluating its services against your specific needs will help you make informed decisions about partnering with Mutual Securities, Inc. For more information contact Bakhtiari & Harrison.