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.

Best Practices for Financial Advisors to Achieve Client Goals

For financial advisors, achieving client goals requires more than investment expertise. It involves a thorough understanding of each client’s unique financial situation, continuous communication, and diligent portfolio management. A key aspect of this process is ensuring that a client’s material information, such as income, net worth, age, and life changes, is regularly updated and accurately reflected in their financial plans. This blog outlines the best practices for financial advisors to ensure they are effectively serving their clients’ needs and goals.

The Importance of Updating Client Information

Accurate and timely information is crucial for financial advisors to make informed decisions about investment portfolios and overall financial strategies. Here are the main reasons why updating client information is essential:

Customized Investment Recommendations: Advisors rely on up-to-date financial information to tailor investment recommendations to meet clients’ specific needs and goals. Changes in income, net worth, or financial objectives can significantly impact the types of investments that are suitable. For example, a significant increase in income might allow for higher risk tolerance, whereas a decrease might necessitate a more conservative approach.
Precise Risk Assessment: A client’s risk tolerance can change over time due to their evolving financial situation, life stage, and personal preferences. An accurate assessment of risk tolerance helps advisors build portfolios that align with clients’ comfort levels and financial objectives. Without updated information, portfolios might not reflect current risk preferences, leading to potential discomfort and financial stress.
Regulatory Compliance: Advisors must comply with regulatory bodies like the Financial Industry Regulatory Authority (FINRA), which mandates that investment recommendations be suitable for clients. This suitability requirement is based on clients’ current financial situations and investment profiles. Keeping information up to date helps advisors remain compliant and protects clients from unsuitable investment strategies.
Adaptability to Life Changes: Life events such as marriage, divorce, the birth of a child, or retirement can significantly impact financial goals and needs. Timely updates on these changes ensure that financial plans remain relevant and effective. For instance, the birth of a child might necessitate adjustments to savings and insurance plans, while approaching retirement could shift focus towards preserving capital and generating income.
Tax Efficiency: Changes in a client’s financial situation can affect tax liability and the strategies most beneficial to them. By keeping information current, advisors can implement tax-efficient investment strategies to minimize tax burdens and maximize after-tax returns.

Utilizing Updated Information

Financial advisors use updated client information in various ways to manage portfolios effectively and provide sound financial advice. Here’s how:

Asset Allocation: Clients’ income, net worth, and financial goals determine how assets should be allocated across different asset classes (e.g., stocks, bonds, real estate). Updated information allows advisors to adjust asset allocations to reflect current financial situations and market conditions.
Investment Selection: Advisors use financial profiles to select specific investments that align with clients’ risk tolerance and objectives. For example, an increase in income might lead advisors to recommend higher-growth investments with potentially greater returns but higher risk.
Comprehensive Financial Planning: Financial planning involves more than just investments; it includes retirement planning, estate planning, insurance, and tax strategies. Accurate information ensures that all aspects of financial plans are coordinated and working together towards clients’ goals.
Performance Monitoring and Rebalancing: Regularly updated information helps advisors monitor portfolio performance and make necessary adjustments. For instance, if a client’s risk tolerance decreases due to a significant life event, advisors might rebalance portfolios to reduce exposure to high-risk assets.

Best Practices for Financial Advisors

Maintaining accurate and up-to-date client information is a collaborative process between advisors and clients. Here are best practices for advisors to ensure they are effectively serving their clients’ goals:

Regular Reviews: Schedule regular reviews with clients to discuss any changes in their financial situation, goals, or risk tolerance. These reviews can be conducted annually or more frequently if needed.
Prompt Updates: Encourage clients to inform you promptly of any significant changes in their lives, such as a job change, inheritance, major purchase, or health issue. These changes can have immediate implications for their financial plans.
Open Communication: Maintain open and honest communication with clients. Provide clear explanations and ensure clients feel comfortable sharing complete and accurate information, which enables better decision-making.
Documentation: Assist clients in keeping all relevant financial documents organized and readily accessible. This includes tax returns, bank statements, investment account statements, and documents related to significant life events.

Conclusion

Updating client information is not just an administrative task—it is a critical aspect of effective financial planning and portfolio management. Accurate and current information enables financial advisors to provide personalized, suitable, and compliant recommendations that align with clients’ financial goals and circumstances. By maintaining open communication and regularly reviewing clients’ financial situations, advisors can ensure that their investment strategies remain relevant and effective, helping clients achieve long-term financial success.

At Bakhtiari & Harrison, we emphasize the importance of informed and up-to-date financial planning. We work closely with our clients to ensure their financial information is current, enabling us to provide the best possible advice and advocacy. Whether you’re navigating life changes, seeking investment guidance, or addressing legal concerns, our team is here to support you every step of the way. For more information on how we can assist you, visit our website atwww.bhseclaw.com.