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.

Is it the Risk or Return? What a Stockbroker Emphasizes Makes a Difference

In investing, two primary factors drive decision-making: risk and return. How a stockbroker prioritizes these elements can significantly impact an investor’s portfolio. Understanding the balance between risk and return is essential for making informed decisions and protecting investments.

In this article, we’ll explore the importance of risk assessment, the role of portfolio risk, and what can happen when a stockbroker emphasizes risk or return. We’ll also discuss your legal options consulting with California Investment Loss Attorneys if you feel your stockbroker has mismanaged your investments.

Understanding Risk and Return

Risk and return are the two sides of the investment coin. While returns represent the potential gains from an investment, risk indicates the possibility of losing part or all of the invested capital.

The Basics of Risk Assessment

Risk assessment is evaluating the potential risks associated with an investment. This involves analyzing various factors, including market volatility, economic conditions, and the financial health of the investment. A thorough risk assessment helps investors understand the potential downsides and make more informed decisions.

The Importance of Portfolio Risk

Portfolio risk refers to the overall risk associated with a collection of investments. Diversification, or spreading investments across various asset classes, can help mitigate portfolio risk. By balancing high-risk and low-risk investments, investors can protect themselves against significant losses while aiming for reasonable returns.

The Stockbroker’s Role: Risk vs. Return

A stockbroker’s emphasis on either risk or return can shape an investor’s portfolio differently.

Emphasizing Risk

When stockbrokers focus on risk, they prioritize protecting the investor’s capital. This approach often involves recommending safer, lower-risk investments. While this can help preserve wealth, it may also limit potential returns. Investors with a low-risk tolerance or those nearing retirement may prefer this conservative approach.

Emphasizing Return

On the other hand, a stockbroker who emphasizes return aims to maximize the investor’s gains. This strategy typically involves higher-risk investments with the potential for substantial returns. While this can lead to significant profits, it also increases the likelihood of losses. This approach may appeal to younger investors with a higher risk tolerance and a longer investment horizon.

The Consequences of Mismanagement

When a stockbroker fails to balance risk and return appropriately, it can lead to significant financial losses for the investor. Mismanagement can occur in various ways:

Overemphasis on High-Risk Investments: If a stockbroker focuses too much on high-return investments without adequately considering the associated risks, the investor may face substantial losses.
Neglecting Risk Assessment: Failing to conduct a thorough risk assessment can result in poor investment choices and unexpected losses.
Ignoring Investor’s Risk Tolerance: Not considering the investor’s risk tolerance can lead to unsuitable investment recommendations.

Can I Sue My Stockbroker?

You may have legal options if you believe your stockbroker has mismanaged your investments. Investors can pursue claims through arbitration with the Financial Industry Regulatory Authority (FINRA). Consulting with an experienced California Investment Loss Attorney or California FINRA lawyer can help you understand your options and take appropriate action.

Legal Options for Investors

If you feel that your stockbroker has failed to manage your investments properly, there are legal avenues you can explore.

FINRA Arbitration

The Financial Industry Regulatory Authority (FINRA) provides a forum for resolving disputes between investors and brokerage firms. FINRA arbitration is often faster and less expensive than traditional litigation. An experienced California FINRA lawyer can guide you through the arbitration process and help you seek compensation for your losses.

Civil Litigation

In some cases, when there is not an arbitration agreement, investors may choose to pursue civil litigation against their stockbroker or brokerage firm. This process involves filing a lawsuit in court and can be more time-consuming and costly than arbitration. However, it may be the best option for recovering significant losses or holding the stockbroker accountable for egregious misconduct.

Hiring a California Investment Loss Attorney

Navigating the legal landscape can be challenging, especially when dealing with investment losses. Hiring a knowledgeable California Investment Loss Attorney can provide valuable guidance and representation. These attorneys specialize in handling cases involving investment mismanagement and can help you determine the best course of action.

Tips for Protecting Your Investments

While it’s essential to understand your legal options, taking proactive steps to protect your investments is equally important.

Regularly Review Your Portfolio

Regularly reviewing your portfolio can help you stay informed about your investments’ performance and make necessary adjustments. This practice allows you to identify potential issues early and address them before they escalate.

Communicate with Your Stockbroker

Maintaining open communication with your stockbroker is crucial. Ensure that they understand your risk tolerance, investment goals, and any changes in your financial situation. Don’t hesitate to ask questions or seek clarification on investment recommendations.

Educate Yourself

Educating yourself about investing can empower you to make better decisions and hold your stockbroker accountable. Understanding basic investment principles, risk assessment, and portfolio management can help you navigate the complexities of the financial markets.

The balance between risk and return is a fundamental aspect of investing. A stockbroker’s emphasis on either element can significantly impact your portfolio’s performance. Understanding the importance of risk assessment, portfolio risk, and legal options allows you to make more informed decisions and protect your investments.

If you believe your stockbroker has mismanaged your investments, consulting with Bakhtiari & Harrison, an experienced California Investment Loss Attorney law firm, can provide valuable guidance and help you seek compensation for your losses. Taking proactive steps to protect your investments is essential for long-term financial success.