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.

Can You Sue Someone for Investment Fraud?

Investment fraud is a serious crime. It can cause dramatic financial losses and affect the lives of victims. Victims may also feel emotional pain and lose their sense of security. When an investor trusts a person or company and feels deceived, they have the right to take action to recover thier investment losses.

But can you actually sue someone for investment fraud? The answer is yes, but it’s not as simple as it seems.

In this blog, we will look at how to take legal action. We will discuss the types of fraud that may apply. You will also learn what you need to know about filing a claim.

Understanding Investment Fraud

Investment fraud occurs when an individual or entity deceives investors in order to secure financial gain. This can include giving false information, leaving out important details, or using illegal practices. These actions can lead the investor to make bad financial choices. The main goal of the fraudster is to make money by hurting the investor. This often causes significant financial harm to the victim.

There are many different forms of investment fraud, including:

Ponzi schemes: These are fraudulent investment operations where returns to earlier investors are paid using the capital of newer investors rather than from profit earned by the operation.
Pyramid schemes: A business model that recruits members by promising payments or services, primarily for enrolling others into the scheme rather than selling any actual products or services.
Insider trading: This occurs when someone with confidential information about a company’s financial status uses it to their advantage before that information is made available to the public.
Brokerage fraud: This can involve a broker making false promises, mismanaging investments, or acting in a way that puts the broker’s interests ahead of the investor’s.
Pump-and-dump schemes: Fraudsters artificially inflate the price of a stock through misleading statements and then sell their shares at the peak price before the stock’s value plummets.

Investment fraud can confuse victims. They often do not know what went wrong or what to do next. Fortunately, there are legal options available.

Legal Grounds for Investment Fraud

To successfully sue for investment fraud, it is important to understand the legal basis for filing such a lawsuit. In most cases, victims will file a claim based on one or more of the following:

Securities fraud: This is a broad term that refers to deceptive practices in the stock or commodities markets. Victims can sue under federal and state laws. This includes the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws hold people strictly responsible for fraud related to securities.
Breach of fiduciary duty: Investment professionals, such as brokers or financial advisors, owe their clients a fiduciary duty, meaning they must act in their clients’ best interests. If they fail to do so, either by acting negligently or dishonestly, they may be held accountable for the financial harm caused.
Negligent misrepresentation: This occurs when an investment professional provides false or misleading information to an investor, either knowingly or because of a lack of due diligence. If the investor relied on that information to make a financial decision and suffered losses as a result, they can pursue legal action.
Common law fraud: In some cases, investment fraud may not fall under specific securities laws, but victims can still sue based on traditional common law fraud. This involves proving that the fraudster intentionally misrepresented or concealed material facts to induce the victim to act to their detriment.

Can I Sue Someone for Investment Fraud? Yes and No

Filing a lawsuit for investment fraud involves several key steps. The first is gathering evidence to support your claim. This could include documents, emails, or records that demonstrate the fraudulent activity. You must also show that you suffered financial harm because of the fraud. Courts need proof of damages to move forward with a case. Once you’ve gathered evidence, you can file a complaint in either state or federal court, depending on the circumstances.

If your case involves an investment advisor, most if not all advisory agreements contain an arbitration provision. Many disputes with brokers or investment advisors require FINRA arbitration.

Throughout the process, it’s important to understand that these cases can be complex. A strong case can help recover lost investments. It may also lead to punitive damages and compensation for emotional distress, depending on the area.

Why Investment Fraud Lawyers at Bakhtiari & Harrison Can Help

If you believe you’ve been a victim of investment fraud, it’s crucial to take action quickly. The longer you wait, the more difficult it can be to recover your losses. If your case involves a Ponzi scheme, insider trading, or other fraud, taking legal action can help. It can hold wrongdoers accountable and give you the compensation you deserve.

At Bakhtiari & Harrison, we are committed to protecting the rights of investors. Contact us today to discuss your case and explore your legal options. We are here to guide you through the process and help you recover what you’ve lost.