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.

Debunking the Myth: Wealthy Investors Can Still Recover from Unscrupulous Stockbrokers

There is a common misconception that wealthy individuals have no recourse when a stockbroker mismanages their portfolio or even steals from them. This belief can prevent high net-worth individuals from seeking justice and recovering losses caused by unscrupulous brokers. However, wealth does not negate the legal obligations stockbrokers owe their clients. These obligations include the duty to act in the best interests of the client. Wealthy investors are as entitled to legal protection as anyone else, and they can and should take action if a broker has wronged them.

Understanding Fiduciary Duty: What It Means for Wealthy Investors

Fiduciary duty is a legal obligation requiring a stockbroker to act in their client’s best interests. This duty is one of the highest standards of care in the law and includes responsibilities such as loyalty, care, and acting in good faith. A stockbroker who breaches these duties can be held liable for the losses incurred by the investor, regardless of the investor’s wealth.

Fiduciary duty means that a stockbroker must prioritize the client’s interests over their own. They must avoid conflicts of interest, provide full and fair disclosure of all material facts, and ensure that any investment recommendations are suitable for the client’s financial situation, goals, and risk tolerance. Importantly, this duty applies to all clients with a modest portfolio or significant wealth.

The Misconception About Wealthy Investors

The pervasive myth is that wealthy investors are not protected by the same laws and regulations that safeguard other investors. Some believe that because high net-worth individuals can afford to take more risks or absorb losses, they deserve less protection under the law. However, this is not true.

The law recognizes that all investors, regardless of their financial status, are entitled to fair and honest treatment from their brokers. The fiduciary duties brokers owe do not diminish based on the client’s wealth. Wealthy investors are often more vulnerable to sophisticated schemes and high-stakes fraud, making the need for legal protection even more critical.

Key Cases: Duffy v. Cavalier California and SEC v. Kernweis

Two important cases illustrate that even wealthy investors and those involved in speculative investments are still protected under the law: Duffy v. Cavalier, and SEC v. Kernweis.

In the Duffy v. Cavalier case, the court reinforced the principle that a broker’s fiduciary duty extends to all clients, regardless of their wealth. The plaintiffs, who were wealthy investors, alleged that their broker engaged in unsuitable trading and made misrepresentations that led to significant financial losses. The court ruled in favor of the plaintiffs, affirming that the broker’s duty to act in the clients’ best interests was paramount. This case underscores that wealthy investors are entitled to the same level of protection and can recover damages when those protections are violated.

Similarly, the SEC v. Kernweis case involved a broker who engaged in speculative and high-risk investments on behalf of his clients. The clients, in this case, were wealthy individuals who could afford to take on more risk. However, the SEC stepped in, arguing that even speculative investors are entitled to truthful and fair dealings from their brokers. The court agreed, imposing significant penalties on the broker for his misconduct. This case demonstrates that the law does not excuse fraudulent or unethical behavior simply because the investor is wealthy or involved in speculative trading.

Why Wealthy Investors Should Take Action

Wealthy investors might hesitate to pursue legal action against a broker, perhaps due to a belief that their wealth disqualifies them from receiving compensation or that the legal process may be more trouble than it’s worth. However, these cases illustrate that the law is on their side, and recovery is possible. Ignoring misconduct because of wealth perpetuates the problem and can lead to further financial harm.

If you are a wealthy investor who has suffered losses due to a broker’s breach of fiduciary duty, you have every right to seek legal recourse. Brokers are legally bound to act in your best interests; if they fail, they should be held accountable. By taking action, you can recover your losses and help prevent similar misconduct from happening to others.

The Role of Legal Representation

Navigating the complexities of securities law and fiduciary duty can be challenging, especially for high-net-worth individuals with significant assets at stake. This is why working with experienced investment fraud attorneys who understand the unique needs of wealthy investors and can provide the expert legal guidance necessary to pursue a successful recovery is crucial.

Why Bakhtiari & Harrison is the Right Law Firm for Defrauded Investors

When representing high net-worth individuals defrauded by unscrupulous stockbrokers, Bakhtiari & Harrison stands out as the law firm of choice. As highly skilled investment fraud and FINRA securities lawyers, we have built a reputation for excellence in securities arbitration and litigation, consistently securing significant recoveries for clients their brokers have wronged.

Here’s why Bakhtiari & Harrison is uniquely positioned to represent wealthy investors:

Deep Expertise in Securities Law: Bakhtiari & Harrison brings over 50 years of collective experience in handling complex securities cases. Our team of investment fraud attorneys is well-versed in the intricacies of securities regulations and fiduciary duties, ensuring that no detail is overlooked in your case.
Proven Track Record: We have successfully represented high net-worth clients in a range of cases, from straightforward fraud to highly complex financial disputes. Our success in landmark cases, such as securing a $54 million award in a FINRA arbitration, demonstrates our ability to achieve substantial victories even in the most challenging circumstances.
Client-Centric Approach: At Bakhtiari & Harrison, we understand that wealthy investors face unique challenges and risks. We take a personalized approach to each case, tailoring our legal strategies to meet the specific needs and goals of our clients. Our investment fraud lawyers are dedicated to protecting your financial interests and reputation throughout the legal process.
Innovative Legal Strategies: Our firm is known for its innovative approach to legal representation. We collaborate with financial experts and leverage the latest legal developments to build strong, evidence-based cases that stand up to scrutiny in arbitration and court.
Leadership in the Legal Community: Bakhtiari & Harrison’s attorneys have played key roles in shaping the rules and regulations that govern securities arbitration and litigation. As respected FINRA securities lawyers, our leadership gives us unique insights into the legal landscape, allowing us to provide cutting-edge representation to our clients.
Commitment to Justice: We are deeply committed to holding brokers accountable for their actions. Our attorneys are relentless in their pursuit of justice, ensuring that our clients receive the compensation they deserve.

Don’t Let Wealth Stand in the Way of Justice

The idea that wealthy investors cannot recover from unscrupulous brokers is a dangerous misconception. Wealth does not diminish a broker’s legal obligations nor disqualify an investor from seeking justice. Fiduciary duties are owed to all clients, regardless of their net worth, and when those duties are breached, the law provides avenues for recovery.

If you believe your broker breached their fiduciary duty and caused financial harm, do not hesitate to act. Bakhtiari & Harrison is here to help you navigate the legal process and recover the compensation you are entitled to. As seasoned investment fraud attorneys and FINRA securities lawyers, we are prepared to hold your broker accountable and ensure you receive the justice you deserve. Contact us today to discuss your case and learn more about how we can assist you in protecting your financial future.