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.

Spartan Capital Securities Lawsuit, Complaints & FINRA Regulatory Action

Regulators are investigating Spartan Capital Securities for investment fraud complaints and FINRA regulators have also taken action. These issues include excessive trading and compliance failures. Bakhtiari & Harrison helps people affected by investment fraud at Spartan Capital Securities. They are focused on guiding clients through the legal process.

This blog discusses Spartan Capital Securities and the regulatory actions taken in response to the accusations made against them. If these actions have affected you, the blog also offers information on what you can do.

What is Spartan Capital Securities?

Spartan Capital Securities, LLC in New York provides investment options and advisory services as a financial services firm. The firm must follow strict rules as a broker-dealer regulated by FINRA and the SEC.

Some people have complained. Regulators are worried. They think the company is not following the rules. They may not be looking out for clients.

Complaints Against Spartan Capital Securities

Numerous complaints have been filed against Spartan Capital Securities, accusing the firm of various forms of misconduct. Since 2017, FINRA, state regulatory organizations, and individual investors have raised allegations of fraud, negligence, and breach of fiduciary duty. Key issues include:

Churning and Excessive Trading

Churning involves excessive trading in a client’s account to generate commissions rather than advance the client’s investment goals. This unethical practice directly contradicts the principle of acting in the client’s best interest. Churning can hurt a client’s portfolio by charging unnecessary fees and making bad market moves. This can result in significant financial losses and potential tax issues from short-term gains.

Compliance Issues

Spartan Capital Securities has faced criticism for failing to comply with mandatory regulatory reporting. The company keeps putting off updating Forms U4 and U5, important papers for showing customer complaints and what happened. This lack of transparency can mislead clients and regulators about the firm’s history and customer grievances. Additionally, regulators have accused Spartan Capital Securities of misclassifying the outcomes of customer disputes, potentially misrepresenting the firm’s professional conduct and dispute resolution.

How to Proceed if You’ve Been Affected

If you think Spartan Capital Securities has hurt your investments, you need to act quickly. Here’s a guide on how to protect your financial interests:

Review Your Account Statements: Examine your transaction history for unauthorized or unusual activity.
To spot excessive trading, watch out for lots of trades, high turnover rates, and expensive broker fees, which could be a sign of churning.
To find complaints and regulatory actions, use resources like FINRA BrokerCheck, the SEC’s EDGAR Database, and state securities regulators. These resources can help you learn about the firm’s past and any similar issues.
Get advice from a financial advisor or lawyer who can give personalized guidance based on your situation.
Report an issue to FINRA if you suspect misconduct. This can start an investigation and lead to a resolution.

Regulatory Actions by FINRA

FINRA has taken significant action against Spartan Capital Securities, highlighting serious concerns about the firm’s compliance with regulatory standards. The firm’s non-compliance with reporting requirements has been a major issue, including:

Reporting Failures

Spartan Capital Securities was charged for failing to report 223 required amendments for 72 brokers, including 162 instances related to customer-initiated arbitrations. The firm also failed to disclose nine cases where customers won disputes in arbitration against its brokers. These omissions were significant in maintaining transparency and accountability in the firm’s operations.

FINRA Arbitration Case (Case No. 18-04117)

This case involved serious allegations, including breach of fiduciary duty, churning, unauthorized trading, and lack of supervision. The arbitration concluded with Spartan Capital Securities being ordered to pay the complainant $15,806.45.

Spartan Capital Securities was fined $600,000 for not following the rules properly. They also had to hire an outside consultant to improve their supervision. John Lowry and Kim Monchik, key executives, were fined and suspended from associating with any FINRA member firm for two years. These actions underscore the severity of the firm’s regulatory violations.

Can You Sue Spartan Capital Securities?

If Spartan Capital Securities caused you financial losses, you may be able to get compensation by taking legal action. Contracts with financial companies often include arbitration clauses. These arbitration clauses require parties to resolve disputes through FINRA arbitration rather than traditional court proceedings. Here’s what you can do:

Understand Your Rights: Investors are entitled to ethical management of their investments. If Spartan Capital Securities or its employees caused you to lose money, you may be able to get compensation.
Consult a Investment Fraud Attorney: Working with an attorney specializing in securities law and investment fraud is crucial. They can evaluate your case, guide you through the arbitration process, and help you present your claims effectively.
Prepare for FINRA Arbitration: Gathering evidence and preparing a strong case is vital for a successful arbitration outcome. Your attorney will assist in collecting necessary documentation and formulating a compelling argument.
Avoid Direct Negotiation Without Representation: It’s advisable to have legal representation when dealing with Spartan Capital Securities. An experienced attorney can adequately represent your interests and prevent potential pitfalls.

Consult with Bakhtiari & Harrison

If you think Spartan Capital Securities didn’t handle your investments properly, Bakhtiari & Harrison can assist you. Specializing in securities and investment fraud, our attorneys bring extensive experience in arbitration and litigation. If you trade too much, break rules, or don’t follow regulations, we can assist you with FINRA arbitration. This can help you recover compensation for any losses you have incurred.

Trust Bakhtiari & Harrison to defend your interests against even the most formidable investment firms. Contact us today for a free consultation and learn how we can assist in recovering your investment losses.