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.

Understanding FINRA Rule 13805, 3 Ways It Impacts Investors

FINRA plays a crucial role in regulating brokers and resolving disputes between investors and brokerage firms. One of the key rules that comes into play in certain arbitration cases is FINRA Rule 13805, which governs how arbitrators handle cases involving the expungement of customer dispute information. Expungement is a process that allows brokers to remove certain information from their public records, but it is granted only under specific conditions.

At Bakhtiari & Harrison, we understand how these rules can affect investors and brokers alike. In this blog, we’ll take a closer look at FINRA Rule 13805 and explain its importance in maintaining transparency in the financial industry.

What Is FINRA Rule 13805?

FINRA Rule 13805 outlines the procedures arbitrators must follow when considering requests to expunge customer dispute information from a broker’s record. Customer dispute information, which includes complaints or disputes filed by investors, is recorded on the broker’s Central Registration Depository (CRD) and is publicly available through FINRA’s BrokerCheck tool. This information helps investors make informed decisions about brokers and ensures transparency in the financial industry.

Expungement is not taken lightly because it removes important information from public records. Rule 13805 ensures that this process is handled carefully, requiring arbitrators to follow strict guidelines before granting an expungement.

The Importance of Rule 13805

FINRA Rule 13805 exists to balance the interests of brokers and investors. While brokers may seek expungement to protect their reputations from unfounded claims, it is essential that investors have access to accurate information about potential risks when choosing a broker. The rule sets a high bar for granting expungement to ensure that only appropriate cases are removed from public records.

How Expungement Works Under FINRA Rule 13805

When a broker requests the expungement of customer dispute information, the process involves several steps to ensure fairness and thorough evaluation. Here’s how it typically works:

Arbitration Hearing: The broker requesting expungement must participate in an arbitration hearing where the arbitrator will review the case. The customer who filed the dispute is given notice of the hearing and has the right to participate, but they are not required to do so.
Strict Criteria: For expungement to be granted, the arbitrator must determine that one of the following conditions is met:
- The claim or allegation is factually impossible or clearly erroneous.
- The broker was not involved in the alleged conduct.
- The claim is false.
These conditions ensure that expungement is only granted in cases where the customer’s complaint does not reflect reality or involves misinformation.
Detailed Explanation Required: The arbitrator is required to provide a written explanation for the decision, outlining the reasons for granting or denying expungement. This is in line with FINRA Rule 2080, which governs the process of removing information from the CRD system. This explanation ensures transparency and accountability in the decision-making process.
Court Confirmation: Even if the arbitrator grants expungement, the decision must be confirmed by a court before it is finalized. This additional step ensures that expungement decisions are legally sound and prevents misuse of the process.

Why Expungement Matters to Investors

For investors, having access to a broker’s record is critical when making informed decisions about whom to trust with their investments. FINRA BrokerCheck provides detailed information about a broker’s history, including customer disputes, regulatory actions, and employment history.

If information is expunged without proper justification, it can deprive future investors of important details that could influence their decision-making. By setting strict guidelines for expungement, FINRA Rule 13805 helps protect the integrity of the information that investors rely on when choosing a broker.

Real-World Example of Expungement

There have been instances where brokers have successfully sought expungement under Rule 13805. For example, in a recent FINRA arbitration case, a broker requested expungement of a customer dispute alleging unsuitable investment recommendations. After reviewing the evidence, the arbitrator determined that the allegations were factually incorrect, and expungement was granted. The arbitrator’s detailed written explanation was required under Rule 13805 to ensure that the decision was transparent.

This example demonstrates how Rule 13805 ensures that only disputes meeting strict criteria are removed from a broker’s public record.

How Bakhtiari & Harrison Can Help

Whether you’re an investor looking to understand the importance of broker transparency or a broker navigating the expungement process, Bakhtiari & Harrison is here to assist you. We help investors protect their rights and guide brokers seeking to resolve disputes.

Our team is dedicated to helping you understand the intricacies of FINRA rules and how they may apply to your situation. If you have questions about FINRA Rule 13805 or need assistance with a related legal matter, we’re here to help.

FINRA Rule 13805

If you’ve been involved in a dispute and want to know more about expungement under FINRA Rule 13805, or if you’re an investor seeking information about a broker, contact Bakhtiari & Harrison. Our team is ready to provide the guidance and support you need.