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.

Protecting Your Investments: How the Lakewood, NJ Orthodox Jewish Community Can Avoid Affinity Fraud in Alternative Investments

In the Orthodox Jewish community, trust is a cornerstone of its identity. Whether it’s relying on a neighbor for Shabbat meals or seeking advice from a trusted rav, our community thrives on shared values, mutual support, and deep-rooted faith. However, this same trust that strengthens our community can also make us vulnerable—especially when it comes to investing.

Imagine this: A fellow congregant approaches you with an “exclusive” investment opportunity. They speak of high returns, minimal risk, and how this opportunity is only being shared within the community. They might even mention that other respected members have already invested. It feels safe, familiar, and aligned with the values we hold dear. But what if this opportunity isn’t what it seems? What if it’s a trap designed to exploit the very trust that binds us?

This is the reality of affinity fraud—a deceptive scheme that preys on the trust within close-knit groups, including religious communities like ours. In recent years, affinity fraud has increasingly targeted the Orthodox Jewish community, particularly through alternative investments and private placements. These investments, while potentially lucrative, are often complex, unregulated, and ripe for exploitation.

At Bakhtiari & Harrison, we’ve seen firsthand the devastating impact of affinity fraud on investors who thought they were making safe, community-backed decisions. Our mission is to protect you from falling victim to these schemes and to help you recover if you’ve already been affected. In this blog, we’ll walk you through the dangers of affinity fraud, how it operates in the world of alternative investments and private placements, and most importantly, how you can safeguard your hard-earned money.

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Affinity Fraud in the Lakewood, NJ Orthodox Jewish Community

Affinity fraud is a type of investment scam that exploits the trust and relationships within a specific group—often religious, ethnic, or social communities. Fraudsters, sometimes even members of the community themselves, use their shared identity to gain credibility and lure victims into fraudulent schemes. In the Orthodox Jewish community, where trust and mutual support are deeply ingrained, affinity fraud can be particularly insidious.

Here’s how it typically works:

The Setup: A fraudster, often posing as a successful investor or businessperson, gains the trust of community leaders or influential members. They may appear to be a “big macher,” attend synagogue, sponsor events, or donate to charitable causes to build credibility.
The Pitch: Once trust is established, the fraudster introduces an “exclusive” investment opportunity—often in alternative investments, such as private placements, real estate ventures, or unregulated securities. They promise high returns with little risk, claiming it’s a “sure thing” backed by the community.
The Pressure: To create urgency, the fraudster might say the opportunity is limited or that other respected community members have already invested. They rely on the natural human tendency to follow the crowd, especially when that crowd includes people we respect and trust.
The Fallout: By the time the fraud is uncovered, the damage is done. Investors lose their savings, retirement funds, or even their homes. The emotional toll is equally devastating, as victims grapple with betrayal by someone they considered “one of their own.”

According to the Securities and Exchange Commission (SEC), affinity fraud is one of the most common types of investment fraud, and religious communities are frequent targets. In fact, a report by the North American Securities Administrators Association (NASAA) found that affinity fraud accounted for nearly 20% of all investment fraud cases in the U.S.

For the Lakewood, NJ Orthodox Jewish community, the risks are heightened when it comes to alternative investments and private placements. These investments are often marketed as “safe” or “exclusive,” but they come with unique risks:

Lack of Regulation: Unlike publicly traded stocks or bonds, private placements are not registered with the SEC, meaning there’s less oversight and fewer protections for investors.
Complexity: Alternative investments, such as hedge funds, private equity, or real estate ventures, are often complex and challenging to understand, making it easier for fraudsters to mislead investors.
Illiquidity: These investments are typically illiquid, meaning you can’t easily sell or withdraw your money if something goes wrong.

When affinity fraud intersects with these high-risk investments, the results can be catastrophic. Investors may lose their life savings, and the fraudster often disappears, leaving victims with little recourse.

The Emotional and Financial Impact of Affinity Fraud

The consequences of affinity fraud go beyond financial loss. Victims often experience a profound sense of betrayal, as the fraudster was someone they trusted—perhaps a fellow congregant, a family friend, or even a community leader. This betrayal can lead to feelings of shame, isolation, and reluctance to seek help.

Consider the story of Shlomo, a retiree from Brooklyn who invested his entire pension in a private placement recommended by a trusted member of his synagogue. The investment promised steady returns and was marketed as a way to support Jewish-owned businesses. Within months, the scheme collapsed, and Shlomo lost everything. Not only did he face financial ruin, but he also felt too ashamed to tell his family or seek legal help, fearing judgment from the community.

Shlomo’s story is not unique. Affinity fraud can devastate families, strain relationships, and erode the trust that holds our communities together. That’s why it’s crucial to recognize the signs and take proactive steps to protect yourself.

Bakhtiari & Harrison: Your Trusted Guide in Securities Law

At Bakhtiari & Harrison, we understand the unique challenges faced by the Lakewood, NJ Orthodox Jewish community when it comes to investment fraud. As a leading securities law firm with decades of experience, we’ve helped countless investors recover their losses from fraudulent schemes, including affinity fraud.

Our team is not just knowledgeable in securities law—we’re also deeply committed to protecting the values and integrity of the communities we serve. We’ve successfully represented clients in complex cases involving alternative investments, private placements, and stockbroker misconduct, recovering millions of dollars for victims of fraud.

Here’s how we can help:

Proficiency in Affinity Fraud: We concentrate on identifying and litigating cases of affinity fraud, particularly in close-knit communities where trust is easily exploited.
Tailored Legal Strategies: Every case is unique. We work closely with our clients to develop a legal strategy that fits their specific situation, whether through arbitration, litigation, beis din, or negotiation.
Compassionate Representation: We know that affinity fraud can be emotionally devastating. Our attorneys provide not only legal knowledge but also the empathy and support needed to navigate this difficult time.

One of our recent successes involved a group of investors from a prominent Orthodox Jewish community who were defrauded in a private placement scheme. The fraudster, a well-known figure in the community, had convinced dozens of families to invest in a bogus real estate venture. Through meticulous investigation and aggressive litigation, we were able to recover their losses.

How to Protect Yourself from Affinity Fraud

While affinity fraud can be challenging to detect, there are steps you can take to protect yourself and your family from falling victim to these schemes. Here’s a simple, actionable plan to safeguard your investments:

1. Verify Credentials and Registrations

Before investing in any opportunity, especially alternative investments or private placements, verify the credentials of the person or firm offering the investment. Request their registration status with the SEC or FINRA and verify their background for any disciplinary actions or complaints.

Pro Tip: Use FINRA’s BrokerCheck tool to verify the registration and history of any broker or investment advisor. If they’re not registered, that’s a significant red flag. Additionally, if the individual has disclosures, such as disciplinary actions or a history of frequently moving from one firm to another, be cautious. These patterns can indicate potential trouble and warrant further scrutiny.

2. Understand the Investment Risks

Alternative investments and private placements are inherently risky. Make sure you fully understand the investment before committing any money. Ask for detailed documentation, including offering memoranda, financial statements, and risk disclosures.

Key Questions to Ask:
- What is the track record of this investment?
- How liquid is the investment? Can I easily sell or withdraw my money?
- What are the fees and commissions involved?

3. Seek Independent Advice

Never rely solely on the advice of someone within your community, no matter how trusted they may be. Always seek independent, third-party advice from a licensed financial advisor or attorney who has no connection to the investment opportunity.

Why It Matters: An independent advisor can provide an unbiased assessment of the investment’s risks and suitability for your financial goals.

4. Be Wary of “Exclusive” or “Limited” Opportunities

Fraudsters often create a sense of urgency by claiming that the investment is exclusive or available for a limited time. This pressure tactic is designed to prevent you from doing proper due diligence.

What to Do: Take your time. Legitimate investments don’t require you to make snap decisions. If someone is pressuring you to invest quickly, walk away.

5. Report Suspicious Activity

If something feels off, trust your instincts. Report any suspicious investment opportunities to the SEC, FINRA, or your state securities regulator. You can also consult with an investment fraud attorney to evaluate the legitimacy of the investment.

By following these steps, you can significantly reduce your risk of falling victim to affinity fraud. Remember, it’s not about distrusting your community—it’s about protecting yourself and your loved ones from those who would exploit that trust.

What Happens If You Don’t Act

Ignoring the warning signs of affinity fraud can have dire consequences. If you invest without doing your due diligence, you risk:

Losing Your Life Savings: Many victims of affinity fraud lose their entire investment, leaving them financially devastated.
Damaging Your Family’s Future: The financial fallout can affect your ability to pay for education, retirement, or even day-to-day expenses.
Eroding Community Trust: Affinity fraud doesn’t just hurt individuals—it can fracture the trust within the community, making it harder for legitimate businesses and investors to operate.

Moreover, if you’ve already been defrauded, failing to take legal action can mean forfeiting your chance to recover your losses. Time is of the essence in securities fraud cases, as statutes of limitations may apply.

Contact Bakhtiari & Harrison Today

If you believe you’ve been a victim of affinity fraud, stockbroker fraud, or misconduct involving alternative investments or private placements, don’t wait to seek help. The sooner you act, the better your chances of recovering your losses.

At Bakhtiari & Harrison, we offer a free, confidential consultation to evaluate your case and discuss your legal options. Our experienced securities attorneys have a proven track record of helping investors in the Orthodox Jewish community and beyond. We’ll guide you through every step of the process, from investigation to recovery, with the compassion and expertise you deserve.

Don’t let fraudsters take advantage of your trust. Protect your investments, protect your community, and let Bakhtiari & Harrison fight for you.

Trust, But Verify

In the Lakewood, NJ Orthodox Jewish community, trust is a sacred bond. But when it comes to investing, especially in complex areas like alternative investments and private placements, it’s essential to balance that trust with vigilance. Affinity fraud is a real and growing threat, but by staying informed, verifying credentials, and seeking independent advice, you can protect yourself and your family from financial harm.

At Bakhtiari & Harrison, we’re here to help you navigate these challenges. Whether you’re looking to safeguard your investments or recover from fraud, our team is ready to stand by your side.