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.

10 Shocking Facts About Securities Fraud

Securities fraud, often regarded as a white-collar crime, can have devastating impacts on investors, companies, and the economy. Despite stringent regulations, these fraudulent activities continue to surface, affecting countless individuals and institutions. This article delves into ten shocking facts about securities fraud, unveiling the depth and breadth of this nefarious activity.

What is Securities Fraud?

Securities fraud involves deceptive practices in the stock or commodities markets, designed to mislead investors or manipulate financial markets. This fraud can occur through false or misleading statements, insider trading, or market manipulation. Navigating the complexities of fraud requires specialized knowledge. A securities fraud attorney provides crucial legal assistance to victims, helping them recover losses and hold perpetrators accountable.

A securities fraud attorney investigates claims, gathers evidence, and represents clients in legal proceedings. Their role is vital in both civil and criminal charges, ensuring justice and compensation for affected parties.

Types of Securities Fraud

Fraud can manifest in various forms, each with unique characteristics and methods of deception.

Insider Trading

Insider trading occurs when individuals with privileged information about a company trade its stocks or other securities, breaching their duty and violating market regulations.

Ponzi Schemes

Ponzi schemes promise high returns with little risk to investors, paying profits to earlier investors with funds from newer investors, leading to eventual collapse when new investments dry up.

Accounting Fraud

Accounting fraud involves manipulating a company’s financial statements to present a misleading picture of its financial health, often to inflate stock prices or hide financial woes.

Market Manipulation

Market manipulation includes activities that artificially influence the supply or demand for securities, creating false impressions about the price or market conditions.

Misrepresentation of Information

Misrepresentation involves providing false or misleading statements about a company’s financial status or future prospects to lure investors.

How to Identify Securities Fraud

Recognizing the signs of fraud can prevent significant financial losses.

Unusually High Returns

Be wary of investments promising unusually high returns with little to no risk.

Lack of Documentation

Fraudulent investments often lack proper documentation and transparency.

Pressure to Invest

High-pressure sales tactics are a red flag for potential fraud.

Consistent Positive Returns

Consistent positive returns, regardless of market conditions, can indicate fraudulent activity.

Unregistered Investment Opportunities

Unregistered investments, not vetted by regulatory bodies, pose significant risks.

Steps to Take if You Suspect Securities Fraud

If you suspect securities fraud, immediate action is essential to protect your interests.

Document Everything

Keep detailed records of all communications and transactions.

Contact an Attorney

A attorney focused on securities arbitration and litigation can provide guidance and initiate legal proceedings.

Report to the Appropriate Authorities

Inform regulatory bodies like the Securities and Exchange Commission (SEC) about suspected fraud.

Gather Evidence

Collect all relevant documents and evidence to support your case.

Consider Your Legal Options

Explore all legal avenues for recovery and justice.

Working with a Securities Fraud Attorney

Collaborating with a securities fraud attorney involves several key stages.

Initial Consultation

Discuss your case and potential legal strategies with your attorney.

Investigation and Discovery

Your attorney will conduct a thorough investigation to gather evidence and build your case.

Negotiations and Settlements

Often, cases are settled out of court through negotiations, saving time and expenses.

Litigation and Trial

If a settlement isn’t reached, your attorney will represent you in court.

Appeals and Post-Trial Motions

If necessary, your attorney will handle appeals and post-trial motions to ensure justice is served.

Key Questions

What is securities fraud?

Fraud involves deceptive practices in the stock or commodities markets that mislead investors or manipulate financial markets. This includes false or misleading statements, insider trading, and market manipulation. The main types of fraud are insider trading, Ponzi schemes, accounting fraud, market manipulation, and misrepresentation of information. Each type has unique characteristics but shares the common goal of deceiving investors.

Fraud is investigated by regulatory bodies like the Securities and Exchange Commission (SEC) and law enforcement agencies. Investigations involve scrutinizing financial statements, trading records, communications, and other documents to uncover deceptive practices.

What is the role of the Securities and Exchange Commission (SEC)?

The SEC plays a crucial role in prosecuting securities fraud by investigating allegations, bringing civil enforcement actions, and working with criminal authorities to pursue criminal charges against violators.

Yes, individuals, including company executives, employees, and brokers, can be held liable if they are found to have engaged in deceptive practices that mislead investors. Penalties for securities fraud can include hefty fines, restitution to victims, imprisonment, and permanent bans from serving as an officer or director of a public company. Insider trading is a type of securities fraud where individuals with access to non-public, material information about a company trade its securities, violating their duty to the company and investors.

Can a company be held responsible for fraud committed by its employees?

Yes, companies can be held responsible for fraud committed by their employees if it is determined that the company failed to properly supervise its employees or knowingly benefited from the fraudulent activities.

What is a Ponzi scheme?

A Ponzi scheme is a form of fraud that involves paying returns to earlier investors using funds obtained from newer investors. It collapses when new investments dry up, leading to significant losses. To protect yourself from fraud, conduct thorough due diligence on investment opportunities, be cautious of high-return promises, verify the registration status of investments, and consult with a trusted financial advisor.

Can I file a civil lawsuit for securities fraud?

Yes, victims of securities fraud can file civil lawsuits to seek compensation for their losses. A securities fraud attorney can help navigate the legal process and build a strong case. The key elements to be proven in a securities fraud case are misrepresentation or omission of a material fact, intent to deceive, reliance on the misrepresentation, and resulting financial loss.

Defenses to securities fraud charges can include lack of intent to deceive, absence of reliance by the victim, or the assertion that the alleged misrepresentation was not material.

What is the difference between securities fraud and investment fraud?

Securities fraud specifically involves deceptive practices related to securities, such as stocks and bonds, while investment fraud is a broader term encompassing any fraudulent scheme involving investments, including real estate and commodities.

The Importance of Hiring a Securities Fraud Attorney

Hiring a securities fraud attorney is crucial in navigating the complexities of these cases, protecting your investments, holding fraudsters accountable, and recovering lost funds. Taking action against securities fraud is essential for maintaining market integrity and investor confidence. By understanding these ten shocking facts about securities fraud, investors can better protect themselves and take proactive measures to avoid falling victim to these deceptive practices. Do not hesitate to contact Bakhtiari & Harrison, Trusted Securities Attorneys, if you believe you are a victim of securities fraud.