Question 1

What is FINRA arbitration?

Accepted Answer

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.

Question 2

Why choose arbitration over litigation?

Accepted Answer

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.

Question 3

Who can file a FINRA arbitration claim?

Accepted Answer

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.

Question 4

How do I start the FINRA arbitration process?

Accepted Answer

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.

Question 5

What is a Statement of Claim?

Accepted Answer

A Statement of Claim is a written document submitted by the claimant outlining the facts of the dispute, legal claims, and the desired outcome.

Question 6

What happens after filing the Statement of Claim?

Accepted Answer

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.

Question 7

What fees are involved in FINRA arbitration?

Accepted Answer

Fees include filing fees, hearing session fees, and possibly member surcharges or process fees, depending on the specifics of the case.

Question 8

Can I represent myself in FINRA arbitration?

Accepted Answer

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.

Question 9

How are arbitrators selected?

Accepted Answer

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.

Question 10

What qualifications do FINRA arbitrators have?

Accepted Answer

FINRA arbitrators include attorneys, accountants, financial professionals, and public members who have undergone training and meet FINRA’s qualification standards.

Question 11

How long does the arbitration process take?

Accepted Answer

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.

Question 12

What is a prehearing conference?

Accepted Answer

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.

Question 13

What is discovery in arbitration?

Accepted Answer

Discovery is the exchange of documents and information between the parties to prepare for the hearing. It is more limited than in litigation.

Question 14

What happens during the arbitration hearing?

Accepted Answer

During the hearing, both sides present evidence, call witnesses, and make arguments. The arbitrators then deliberate and render a decision.

Question 15

Is the arbitration hearing open to the public?

Accepted Answer

No, arbitration hearings are private and confidential. Only the parties, their representatives, and the arbitrators may attend.

Question 16

Can I settle my case before the hearing?

Accepted Answer

Yes, parties can settle at any time before the arbitrators render a decision, often through negotiation or mediation.

Question 17

What is mediation in the context of FINRA arbitration?

Accepted Answer

Mediation is a voluntary process where a neutral mediator helps the parties negotiate a settlement. It is separate from arbitration and non-binding.

Question 18

What happens if I lose in arbitration?

Accepted Answer

If you lose, the arbitrator’s decision is final and binding. There are limited grounds for challenging the award in court.

Question 19

Can I appeal an arbitration decision?

Accepted Answer

Generally, you cannot appeal an arbitration decision. However, you can seek to vacate the award on very narrow grounds, such as arbitrator misconduct.

Question 20

What types of disputes are resolved through FINRA arbitration?

Accepted Answer

Disputes include claims of fraud, breach of fiduciary duty, negligence, breach of contract, and other issues related to securities and investments.

Question 21

How are damages determined in arbitration?

Accepted Answer

Damages are determined based on the evidence presented, including financial records, expert testimony, and the specifics of the case.

Question 22

Can arbitrators award attorney’s fees?

Accepted Answer

Arbitrators can award attorney’s fees if provided for by law, contract, or if both parties request it.

Question 23

How do I enforce an arbitration award?

Accepted Answer

An arbitration award can be enforced in court through a confirmation process, making it a judgment that can be collected.

Question 24

What is expungement in FINRA arbitration?

Accepted Answer

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.

Question 25

What are the grounds for vacating an arbitration award?

Accepted Answer

Grounds for vacating an award include arbitrator bias, fraud, corruption, or misconduct, as well as exceeding their powers.

Question 26

Are arbitration awards public?

Accepted Answer

Yes, arbitration awards are published on FINRA’s website, providing transparency and access to past decisions.

Question 27

What is the role of the Office of Dispute Resolution?

Accepted Answer

The Office of Dispute Resolution administers arbitration and mediation cases, ensuring that the process runs smoothly and efficiently.

Question 28

What is a Simplified Arbitration?

Accepted Answer

Simplified Arbitration is for cases involving claims of $50,000 or less, allowing for a quicker and less expensive resolution without a hearing.

Question 29

Can I request an expedited hearing?

Accepted Answer

Yes, in certain circumstances, such as elderly or seriously ill parties, you can request an expedited hearing.

Question 30

What is the role of an arbitrator?

Accepted Answer

An arbitrator acts as a neutral decision-maker, reviewing evidence, hearing testimony, and issuing a binding decision on the dispute.

Question 31

How do I prepare for an arbitration hearing?

Accepted Answer

Preparation involves gathering evidence, preparing witnesses, and developing a clear case strategy to present to the arbitrators.

Question 32

What types of evidence are admissible in arbitration?

Accepted Answer

Evidence can include documents, emails, financial records, expert reports, and witness testimony, subject to the arbitrators’ discretion.

Question 33

Can I request documents from the other party?

Accepted Answer

Yes, through the discovery process, you can request relevant documents and information from the other party to support your case.

Question 34

How does FINRA handle conflicts of interest with arbitrators?

Accepted Answer

FINRA requires arbitrators to disclose any potential conflicts of interest, and parties can object to arbitrators they believe are biased.

Question 35

What happens if a party does not comply with discovery?

Accepted Answer

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.

Question 36

What is a motion in arbitration?

Accepted Answer

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.

Question 37

Can I request interim relief in arbitration?

Accepted Answer

Yes, you can request interim relief, such as temporary restraining orders or injunctions, to preserve the status quo pending the final decision.

Question 38

How are hearing locations determined?

Accepted Answer

Hearing locations are typically determined by the location of the claimant unless both parties agree to a different venue.

Question 39

What is a telephonic or virtual hearing?

Accepted Answer

Telephonic or virtual hearings are conducted via phone or video conference, allowing parties to participate remotely.

Question 40

How are arbitration awards paid?

Accepted Answer

Awards are typically paid by the losing party within 30 days of the decision, unless otherwise specified by the arbitrators.

Question 41

What if the losing party does not pay the award?

Accepted Answer

If the losing party does not pay, you can seek enforcement through the courts, turning the award into a legally enforceable judgment.

Question 42

Are there any limits on the types of claims I can bring in arbitration?

Accepted Answer

FINRA arbitration covers a broad range of claims related to securities, but there are some statutory and regulatory limits on certain types of claims.

Question 43

Can I bring a class action in FINRA arbitration?

Accepted Answer

No, class actions are not permitted in FINRA arbitration. However, you can join other claimants in a single arbitration if the claims are similar.

Question 44

What is the role of expert witnesses in arbitration?

Accepted Answer

Expert witnesses can provide specialized knowledge and opinions to help explain complex financial issues to the arbitrators.

Question 45

How are hearing dates scheduled?

Accepted Answer

Hearing dates are scheduled based on availability of the parties and arbitrators, with consideration for the complexity of the case.

Question 46

Can I request a different arbitrator if I believe one is biased?

Accepted Answer

Yes, you can challenge an arbitrator if you believe they have a conflict of interest or bias that affects their impartiality.

Question 47

What is a “chairperson” in a FINRA arbitration panel?

Accepted Answer

The chairperson is the lead arbitrator who manages the procedural aspects of the case and ensures the hearing runs smoothly.

Question 48

How does FINRA ensure fairness in arbitration?

Accepted Answer

FINRA has rules and procedures in place to ensure a fair and impartial process, including arbitrator training and disclosure requirements.

Question 49

How do I learn more about the FINRA arbitration process?

Accepted Answer

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.

Question 50

How can Bakhtiari & Harrison help with FINRA arbitration?

Accepted Answer

Bakhtiari & Harrison can assist with filing claims, responding, selecting arbitrators, discovery, hearings, and ensuring the best possible outcome through skilled representation and strategic advice.

Blog

Why Registered Investment Advisors Should Consider FINRA Arbitration Agreements

Critical Factors in Purchasing a Stockbroker’s Book of Business

Critical Importance of RIA Updating Customer Information

RIA Customer Agreements: Why an Experienced Securities Attorney is Essential

Finra abandons effort to become RIA regulator