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.

How Do You Prove Investment Fraud?

Investment fraud can be a terrible experience for victims. They often trust their financial future to dishonest people. Whether the fraud is a Ponzi scheme, insider trading, or another trick, it is important to prove it happened. This proof helps hold those responsible accountable and recover your losses. In this blog, we will look at the main steps to prove investment fraud. We will discuss the evidence you need to collect. We will also cover the legal standards to meet for a strong case.

Understanding the Elements of Investment Fraud

To prove investment fraud, you must show that the person or group knowingly used tricks. These tricks must have caused financial harm.

This involves meeting specific legal standards. These standards can vary based on the jurisdiction and type of fraud. However, the following elements are usually required:

Material misrepresentation or omission: The fraudster must have made a false statement or failed to disclose important information. This misrepresentation must be significant enough to affect an investor’s decision to buy, sell, or hold securities.
Intent to deceive: The fraudster must have acted with the intent to deceive or manipulate the victim. In other words, they knowingly engaged in wrongful conduct for their own gain, either by lying, omitting key facts, or violating fiduciary duties.
Reliance: The victim must show that they relied on the false or misleading information provided by the fraudster when making their investment decision. If the investor knew the information was false but proceeded anyway, it could weaken the case.
Damages: Finally, the victim must demonstrate that they suffered financial harm as a result of the fraud. This means proving that the investor lost money or opportunities because of the fraudster’s actions.

Key Evidence in Proving Investment Fraud

Proving investment fraud can be complicated. It requires collecting a lot of evidence to support each part of the claim. The more documentation and proof you have, the stronger your case will be. Here are some types of evidence you may need to collect:

Communications: Emails, phone records, text messages, or other written communications between you and the alleged fraudster are often key pieces of evidence. These communications may show misleading statements, false promises, or omissions.
Transaction records: Investment account statements, contracts, trade confirmations, and other financial records can help prove the fraud occurred. These records are essential for showing how much money was invested, where it went, and how much was lost as a result.
Promotional materials: If the fraudster used marketing materials, brochures, presentations, or websites to attract investors, these could help demonstrate that false representations were made. It’s important to review whether these materials align with what the fraudster promised in person or over the phone.
Witness testimony: In some cases, other investors or individuals involved in the scheme may be willing to testify on your behalf. Witnesses can provide insight into how the fraudster operated, their methods of deception, and how they lured in unsuspecting victims.
Expert analysis: Analyzing the financial and legal aspects of the fraud may require expert input, particularly if complex securities or financial instruments are involved. An expert can help break down the fraudulent practices and explain them in clear, understandable terms.
Regulatory findings: If the fraudster has been investigated by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), or another regulatory body, those findings can bolster your case. Investigations and enforcement actions often result in reports that detail fraudulent activities, which can be used as evidence in civil lawsuits.

Legal Standards for Proving Investment Fraud

The burden of proof in civil fraud cases is typically “preponderance of the evidence.” This means that you must show that it is more likely than not that the fraud occurred. In criminal cases, guilt must be proven beyond a reasonable doubt. In civil cases, the standard of proof is lower.

Plaintiffs often file lawsuits for investment fraud. They usually do this under the Securities Exchange Act of 1934 or the Securities Act of 1933. These federal laws give clear rules for proving fraud. However, they also need a good understanding of how securities are regulated. In addition to these federal laws, state laws—commonly referred to as “Blue Sky laws”—may also provide a basis for fraud claims. It’s important to note that proving investment fraud often depends on establishing a clear pattern of deceptive behavior rather than a single misrepresentation. Courts tend to look at the overall scheme, the relationship between the parties, and how the fraud unfolded over time.

Many investment fraud cases involving members of the securities industry are arbitrated before FINRA, AAA or another arbitration service provider. While the standards are similar, claims can be more nuanced.

Steps to Take After Suspecting Investment Fraud

If you suspect you’ve been a victim of investment fraud, time is of the essence. Here are a few steps to take to protect yourself and gather the necessary evidence:

Document everything: Begin collecting any communications, contracts, and records related to the investment. Make copies and organize them in chronological order.
Contact authorities: Report the suspected fraud to regulatory bodies like the SEC or FINRA. They may conduct their own investigation, and their findings could be valuable to your case.
Seek legal assistance: While proving fraud requires substantial evidence, having the right legal support can make all the difference. An experienced lawyer can help you understand securities law. They will make sure your case is as strong as it can be.

Why Investment Fraud Attorneys at Bakhtiari & Harrison Can Help

If you’ve lost money due to fraudulent investment practices, you don’t have to face this challenge alone. At Bakhtiari & Harrison, we are dedicated to helping investors like you recover their losses and hold wrongdoers accountable. Contact us today to discuss your situation and begin building your case. It’s time to take control of your financial future—reach out now to get started.