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.

Elder Abuse Awareness Day: Safeguarding Senior Citizens from Financial Exploitation

Elder Abuse Awareness Day, observed annually on June 15th, is a critical opportunity to shed light on the unfortunate and often underreported issue of elder abuse. At Bakhtiari & Harrison, we are committed to protecting the most vulnerable members of our society, particularly senior citizens who may fall victim to financial exploitation by unscrupulous financial advisors. As a law firm with a strong focus on securities law and elder financial abuse, we understand the devastating impact that such exploitation can have on the lives of seniors and their families.

Understanding Financial Elder Abuse

Financial elder abuse occurs when a trusted individual, such as a financial advisor, takes advantage of a senior citizen’s assets for personal gain. This can involve unauthorized trading, fraudulent investments, high-fee products, or outright theft. Senior citizens are often targeted due to their accumulated wealth, potential cognitive decline, and sometimes limited understanding of modern financial products.

The consequences of financial elder abuse can be devastating, leading to significant financial loss, emotional distress, and a diminished quality of life. It is crucial for family members, caregivers, and legal professionals to be vigilant and proactive in identifying and preventing such abuse.

Regulatory Landscape: FINRA and State Laws

The Financial Industry Regulatory Authority (FINRA) has issued several notices to its members regarding the protection of senior investors. These notices highlight the responsibilities of financial advisors to act in the best interests of their clients and to be particularly mindful of the vulnerabilities of senior citizens.

FINRA Regulatory Notices

FINRA Regulatory Notice 07-43 (September 2007): This notice provides guidance on the suitability of recommendations to senior investors. It emphasizes the importance of understanding the unique needs and risk tolerances of senior clients and ensuring that recommended investment products are suitable for their financial situation.
FINRA Regulatory Notice 17-11 (March 2017): This notice introduces the concept of a trusted contact person. It encourages firms to ask senior clients to designate a trusted contact person who can be consulted in case of suspected financial exploitation or if there are concerns about the client’s mental capacity.
FINRA Regulatory Notice 20-34 (October 2020): This notice highlights the importance of heightened supervision for senior clients. It recommends that firms implement specific supervisory procedures to monitor the accounts of senior investors, including regular reviews of account activity and heightened scrutiny of transactions.

Best Practices for Protecting Senior Investors

To prevent financial elder abuse, financial advisors and firms should implement several best practices:

Designating a Trusted Contact Person: Encourage senior clients to designate a trusted contact person who can be consulted if there are concerns about the client’s financial transactions or well-being. This provides an additional layer of protection and ensures that someone trustworthy is aware of any suspicious activity.
Regular Account Reviews: Conduct regular reviews of senior clients’ accounts to identify any unusual or unauthorized activity. This helps to detect potential abuse early and take corrective action before significant harm occurs.
Enhanced Communication: Maintain open and transparent communication with senior clients and their families. Clearly explain investment strategies, risks, and fees to ensure that clients fully understand their financial situation.
Training and Awareness: Provide training to financial advisors and staff on the specific needs and vulnerabilities of senior clients. This includes recognizing signs of cognitive decline and understanding the regulatory requirements for protecting senior investors.

State Laws Protecting Senior Citizens

In addition to FINRA’s regulatory framework, many states have enacted laws specifically designed to protect senior citizens from financial exploitation. These laws often include provisions for reporting suspected abuse, civil and criminal penalties for perpetrators, and restitution for victims.

California Welfare and Institutions Code

California has been at the forefront of enacting laws to protect its senior citizens. The California Welfare and Institutions Code includes several provisions aimed at preventing and addressing elder abuse.

Elder Abuse and Dependent Adult Civil Protection Act (EADACPA): This act provides a civil remedy for financial elder abuse, allowing victims to recover compensatory and punitive damages, as well as attorney’s fees and costs. It covers a wide range of abusive behaviors, including fraud, embezzlement, and undue influence.
California Penal Code Section 368: This section makes it a crime to financially exploit a senior citizen or dependent adult. It includes provisions for enhanced penalties if the victim suffers great bodily harm or death as a result of the abuse.
California Welfare and Institutions Code Section 15630: This section mandates that certain professionals, including financial advisors, report suspected financial abuse of elders and dependent adults. Failure to report can result in fines and other penalties.

Protecting Seniors: A Call to Action

Elder Abuse Awareness Day serves as a reminder of the importance of protecting our senior citizens from financial exploitation. At Bakhtiari & Harrison, we are dedicated to advocating for the rights of senior investors and holding financial advisors accountable for their actions. We urge families, caregivers, and professionals to be vigilant in identifying and preventing financial elder abuse.

If you suspect that a senior citizen in your life has been a victim of financial exploitation, we encourage you to take immediate action. Contact our experienced team at Bakhtiari & Harrison for a free consultation. Together, we can ensure that our senior citizens receive the protection and justice they deserve.

Call us at 310.499.4732 to learn more about how we can help. Let’s work together to create a safer and more secure future for our senior citizens.