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 Securities Fraud Hard to Prove? | Bakhtiari & Harrison

Securities fraud is a serious offense that can disrupt markets and devastate investors. Is securities fraud hard to prove? Proving securities fraud, however, can be a complex and challenging process. It involves navigating intricate legal standards, financial data, and regulatory requirements. In this blog, we will break down what makes securities fraud difficult to prove and how working with a skilled legal team, such as Bakhtiari & Harrison, can strengthen your case.

Understanding Securities Fraud, Is Securities Fraud Hard to Prove?

Securities fraud refers to deceptive practices in the trading, selling, or management of investments. Common examples include:

Misrepresenting or omitting material facts in investment opportunities.
Insider trading, where confidential information is used to gain an unfair advantage.
Ponzi or pyramid schemes that defraud investors.
Market manipulation designed to artificially inflate or deflate stock prices.

The complexity of these schemes often makes identifying and proving securities fraud a detailed and resource-intensive process.

Why Is Securities Fraud Hard to Prove?

Several factors contribute to the difficulty of proving securities fraud:

1. Complex Financial Data

Securities fraud often involves intricate financial transactions and records. Identifying fraudulent activity requires deep knowledge of financial systems and the ability to interpret complex data.

2. Proving Intent

One of the most challenging aspects of securities fraud cases is proving intent. Prosecutors or plaintiffs must demonstrate that the accused knowingly engaged in deceptive practices. This requires clear evidence that the individual or entity acted with intent to defraud investors.

3. Evolving Fraud Tactics

Fraudsters often use sophisticated methods to hide their activities. This can include creating layers of transactions or using technology to obscure their tracks, making it harder to trace fraudulent behavior.

4. Legal Standards

To prove securities fraud, specific legal standards must be met. For example, under Rule 10b-5 of the Securities Exchange Act of 1934, a plaintiff must show:

A material misrepresentation or omission.
Scienter (intent or knowledge of wrongdoing).
A connection between the fraudulent activity and the purchase or sale of securities.
Reliance on the fraudulent information.
Economic loss.
A causal link between the fraud and the loss.

Is securities fraud hard to prove? Yes and no — meeting all these criteria can be challenging, especially without strong legal representation.

5. Opposing Legal Teams

Corporations or individuals accused of securities fraud often have access to skilled legal defense teams. These teams work to discredit evidence, question intent, and argue against the plaintiff’s claims, making it even more difficult to prove fraud.

How Can Securities Fraud Be Proven?

Despite the challenges, securities fraud cases can be successful with the right approach. Key steps include:

1. Gathering Evidence

Collecting detailed evidence is crucial. This includes financial records, emails, contracts, and communications that demonstrate misrepresentation or intent to deceive.

2. Expert Testimony

In many cases, expert witnesses such as financial analysts, accountants, or industry professionals are brought in to explain complex data and support the claim.

3. Regulatory Support

Regulatory bodies like the Securities and Exchange Commission (SEC) often play a key role in securities fraud cases. Their investigations can uncover additional evidence and support legal proceedings.

4. Legal Representation

A knowledgeable attorney can help navigate the complexities of securities fraud cases, from filing claims to presenting arguments in court or arbitration.

The Role of Legal Counsel in Proving Securities Fraud

Hiring an attorney experienced in securities law is one of the most critical steps in proving securities fraud. Here’s how they can help:

Case Analysis: Attorneys assess the strength of your case and identify the best path forward.
Evidence Collection: They work to gather, analyze, and present compelling evidence of fraud.
Filing Complaints: Lawyers ensure complaints are properly filed with regulatory agencies like the SEC or FINRA.
Representation: Whether in court or arbitration, attorneys advocate on your behalf, countering defenses and strengthening your claim.

How Bakhtiari & Harrison Can Help

At Bakhtiari & Harrison, we understand the challenges of proving securities fraud. Our team works tirelessly to build strong cases for our clients, leveraging in-depth legal knowledge and financial expertise. Is securities fraud hard to prove? Here’s what we offer:

Comprehensive Case Evaluation: We analyze the details of your situation to determine the best approach.
Evidence Gathering: Our team works to uncover and present compelling evidence to support your claim.
Strategic Representation: We represent your interests in court, arbitration, or regulatory proceedings.
Client-Focused Service: We prioritize communication, ensuring you understand every step of the process.

If you believe you’ve been a victim of securities fraud, don’t let the complexity of proving your case stop you from seeking justice. Contact Bakhtiari & Harrison to schedule a consultation. We’ll guide you through the legal process and fight to recover your losses. Is securities fraud hard to prove? Your financial future deserves protection—let Bakhtiari & Harrison help you navigate the challenges of securities fraud cases. Reach out today to take the first step.