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.

5 Proven Strategies for Beating FINRA Disciplinary Actions

FINRA (Financial Industry Regulatory Authority) disciplinary actions can be daunting for stockbrokers and financial advisors. These professionals face significant consequences, including fines, suspensions, and reputational damage. This comprehensive guide provides five proven strategies to help financial professionals navigate and overcome FINRA actions, ensuring their careers and reputations remain intact.

Introduction

Overview of FINRA and Its Regulatory Role

FINRA is a self-regulatory organization that oversees brokerage firms and exchange markets. Its primary role is to protect investors and ensure the integrity of the financial markets. FINRA enforces rules and regulations that member firms and their associated persons must follow.

Explanation of Disciplinary Actions and Their Consequences

FINRA disciplinary actions can range from fines and censures to suspensions or even permanent bans from the industry. These actions can significantly impact a professional’s career, leading to loss of clients, income, and professional standing. Understanding the severity and implications of these actions is crucial for any financial professional.

Importance of Hiring a Full-Service FINRA Attorney

Engaging a full-service FINRA attorney can be a game-changer. These attorneys have extensive knowledge of FINRA regulations and procedures, providing strategic guidance and representation. They can navigate the complex legal landscape, defend against disciplinary actions, and help protect a professional’s reputation and career.

Understanding the FINRA Regulatory Process

Overview of FINRA’s Regulatory Process

FINRA’s regulatory process involves monitoring, investigation, and enforcement. The process begins with identifying potential violations through automated surveillance, examinations, customer complaints, or other sources. If a violation is suspected, FINRA initiates an investigation.

Types of FINRA Regulations and Rules

FINRA regulations cover various aspects of the financial industry, including sales practices, market integrity, and financial responsibility. Key rules include:

FINRA Rule 8210: Grants FINRA the authority to request documents and information from firms and individuals.
Wells Process: Allows individuals to respond to potential charges before formal disciplinary action is taken.

How to Comply with FINRA Regulations

Compliance involves regular training, internal audits, and staying updated on regulatory changes. Firms should have robust compliance programs and ensure all employees understand FINRA’s rules. Proactive measures, such as frequent reviews of internal processes and practices, help in maintaining compliance.

Common Violations and Penalties

Common violations include fraud, unauthorized trading, and failure to supervise. Penalties for these violations can be severe and include fines, suspensions, and permanent bans from the industry. Financial professionals need to understand these violations and avoid them.

Types of Disciplinary Actions

Overview of the Disciplinary Process

The disciplinary process starts with an investigation. A Wells Notice is issued if violations are found, informing the individual or firm of the potential charges. The accused can then respond to the notice, and formal disciplinary action is taken if the response is inadequate.

Types of Disciplinary Actions

Censure: A formal reprimand.
Fines: Monetary penalties imposed for violations.
Suspension: Temporary removal from the industry.
Bar: Permanent prohibition from the industry.

Factors That May Lead to Disciplinary Actions

Factors that can lead to disciplinary actions include the severity of the violation, the intent behind the action, and the harm caused to investors. Repeat offenses and failure to cooperate with investigations also increase the likelihood of disciplinary actions.

How to Respond to a Disciplinary Action

Responding promptly and thoroughly to any notices from FINRA is crucial. Engage legal counsel to help draft a comprehensive response and consider negotiating a settlement if appropriate. Providing all requested information and cooperating fully with the investigation can positively impact the outcome.

Benefits of Hiring an Experienced Full-Service FINRA Attorney

Expert Knowledge of FINRA Regulations and Procedures

Experienced FINRA attorneys possess in-depth knowledge of the regulations and procedures. They understand the nuances of the rules and can provide crucial advice tailored to the specific situation.

Ability to Navigate Complex Legal Processes

FINRA attorneys handle investigations, respond to Wells Notices, and represent clients in hearings and appeals. Their expertise allows them to navigate the complex legal landscape effectively, ensuring the best possible outcomes for their clients.

Experience in Defending Against Disciplinary Actions

Experienced attorneys have a track record of successfully defending clients against disciplinary actions. Their familiarity with the process and previous cases provides a strategic advantage.

Strategic Guidance and Representation in Negotiations

Attorneys provide strategic advice, represent clients in negotiations, and help mitigate potential penalties. They can negotiate settlements and represent clients in hearings, ensuring their rights are protected.

Protection of Your Reputation and Career

Hiring an attorney helps protect a professional’s reputation and career by ensuring compliance and addressing any allegations swiftly and effectively. An experienced attorney can manage the situation to minimize damage and maintain the professional’s standing in the industry.

How to Choose the Right Attorney for Your Case

Factors to Consider When Selecting a FINRA Attorney

When choosing a FINRA attorney, consider their experience, track record, and familiarity with FINRA regulations. Ensure they have a successful history in handling similar cases and a deep understanding of the financial industry.

Questions to Ask During a Consultation

What is your experience with FINRA disciplinary cases?
How do you approach defending against disciplinary actions?
Can you provide references from similar cases?
What is your success rate in handling FINRA disciplinary actions?

Importance of Communication and Trust

Effective communication and trust between the client and attorney are vital. Choose an attorney who listens, understands your concerns, and communicates clearly. Trust is essential for a successful attorney-client relationship.

Experience in Handling Similar Cases

An attorney with experience in similar cases will be better equipped to handle your situation effectively. Their prior experience can provide insights and strategies that are crucial for a successful defense.

Fee Structure and Payment Options

Understand the fee structure and payment options. Some attorneys may offer flexible payment plans, which can help in managing costs. Discuss the fees upfront to avoid any surprises later.

Key Questions Answered

What is FINRA and What is Its Role in Regulating Financial Markets?

FINRA is a self-regulatory organization that oversees brokerage firms and exchange markets to protect investors and ensure market integrity.

What Types of Disciplinary Actions Can FINRA Take Against Financial Professionals?

FINRA can issue censures, fines, suspensions, and permanent bans from the industry.

How Does FINRA Determine if a Financial Professional Has Violated Regulations?

FINRA investigates potential violations through surveillance, examinations, and complaints. If violations are found, disciplinary actions are taken.

What Are the Potential Consequences of a FINRA Disciplinary Action?

Consequences include reputational damage, loss of clients, fines, suspensions, and permanent bans.

Can a Financial Professional Appeal a FINRA Disciplinary Action?

Yes, professionals can appeal decisions to FINRA’s National Adjudicatory Council and further to the SEC and U.S. Courts of Appeals.

How Long Does a FINRA Investigation Typically Last?

The duration varies depending on the complexity of the case, but it typically lasts several months.

What Should I Do If I Receive a Notice of a FINRA Investigation?

Respond promptly, engage legal counsel, and provide all requested information.

Can I Still Work in the Financial Industry After a FINRA Disciplinary Action?

It depends on the severity of the action. Some sanctions may limit your ability to work in the industry.

How Can I Protect Myself from Facing a FINRA Disciplinary Action?

Maintain compliance, stay informed about regulations, and engage in regular training.

What Is the Difference Between a FINRA Disciplinary Action and a Criminal Charge?

FINRA disciplinary actions are regulatory and administrative, while criminal charges involve violations of criminal law and are prosecuted by governmental authorities.

Are There Any Alternatives to a Formal FINRA Disciplinary Action?

Yes, minor violations can sometimes be resolved through informal actions like Cautionary Actions.

How Can I Check if a Financial Professional Has a History of FINRA Disciplinary Actions?

Use FINRA’s BrokerCheck tool to review the professional’s regulatory history.

Can I File a Complaint with FINRA Against a Financial Professional?

Yes, investors can file complaints through FINRA’s website.

Will a FINRA Disciplinary Action Appear on My Record?

Yes, formal disciplinary actions are reported on the Central Registration Depository (CRD) system and can be accessed through BrokerCheck.

How Can I Stay Updated on FINRA Regulations and Disciplinary Actions?

Regularly visit FINRA’s website, subscribe to their updates, and attend industry seminars and training sessions.

Summary of Key Points

Navigating FINRA disciplinary actions requires a thorough understanding of the regulatory process, proactive compliance, and strategic legal representation. Financial professionals must be vigilant in maintaining compliance and be prepared to respond effectively to any allegations.

Importance of Taking Proactive Steps to Comply with FINRA Regulations

Proactive compliance with FINRA regulations helps prevent disciplinary actions and protects professionals’ careers. Regular training, internal audits, and staying updated on regulatory changes are crucial steps.

Final Thoughts and Recommendations

Staying informed, maintaining robust compliance programs, and seeking expert legal advice when necessary are essential for financial professionals to navigate FINRA disciplinary actions successfully. By following these proven strategies, stockbrokers and financial advisors can protect their reputations and careers, ensuring long-term success in the financial industry.