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.

5 Signs Your Financial Advisor Betrayed Your Trust: A Nationwide Guide for High-Net-Worth Investors on Recovering Investment Losses

For high-net-worth investors who have built substantial wealth, the relationship with a financial advisor or stockbroker is one of profound trust. You have entrusted them with the stewardship of your legacy, the financial security of your family, and the fruits of a lifetime of hard work and innovation. When that trust is broken—not through market downturns, but through negligence, misconduct, or outright deception—the sense of betrayal can be as devastating as the financial loss itself.

You are not alone. At Bakhtiari & Harrison, we have dedicated our practice to representing affluent individuals, families, celebrities, professional athletes, and successful entrepreneurs in these high-stakes situations. From coast to coast, we provide a focused, powerful voice for investors who have been wronged. We understand the unique challenges you face and the discretion you require, and our nationwide practice ensures that you have access to elite legal counsel, no matter where your assets are held.

This guide is intended to illuminate the path forward, explaining how misconduct occurs, why you are a target, and how you can reclaim what is rightfully yours through the Financial Industry Regulatory Authority (FINRA) arbitration process.

Why High-Net-Worth Investors Are Prime Targets

It seems counterintuitive. Investors with significant assets are often financially savvy, sophisticated, and surrounded by a team of professionals. So why are they disproportionately affected by broker misconduct? The reasons are multifaceted and lie at the intersection of psychology, complexity, and opportunity.

The Allure of Large Accounts: The simplest reason is the most powerful. Larger portfolios generate larger fees and commissions. An unscrupulous advisor can generate life-changing income from a single HNW client through excessive trading (churning), selling high-commission products, or leveraging the account.
The Illusion of Sophistication: Brokers often use an investor’s sophistication as a shield, glossing over the intricate risks of complex products like private placements or structured notes. They might use jargon to create an aura of expertise, discouraging questions and deep scrutiny.
The Trust Trap: Successful individuals are adept at building teams and delegating. You develop a personal relationship with your advisor, entrusting them not just with your money, but with your goals. This deep, personal trust can blind an investor to red flags.
The Complexity Cloak: The financial lives of HNW individuals are rarely simple. An advisor can embed unsuitable investments within a large, diversified portfolio, making them difficult to spot. Losses in one area may be temporarily masked by gains in another, allowing misconduct to go undetected for years.
The Privacy Paradox: High-profile and private individuals value discretion above all else. Unscrupulous brokers know this and may count on their HNW clients’ reluctance to pursue legal action, assuming you would rather absorb a significant loss quietly than risk public scrutiny.

Common Sales Practice Violations That Erode Fortunes

Broker misconduct is not always a clear case of fraud. More often, it takes the form of subtle but devastating sales practice violations.

Unsuitability & Regulation Best Interest Violations

This is the cornerstone of investor protection. An investment is “unsuitable” if it does not align with your specific financial situation, risk tolerance, and goals. This could involve recommending speculative, high-risk ventures for a client whose primary goal is capital preservation.

Overconcentration

This violation occurs when a broker fails to adequately diversify a portfolio, leaving it excessively exposed to the risks of a single stock, bond, or market sector. This can be catastrophic when that single investment fails.

Churning (Excessive Trading)

Churning is when a broker engages in excessive buying and selling in a client’s account primarily to generate commissions, slowly bleeding the account through fees regardless of performance.

Misrepresentation & Omission

This is when a broker makes false statements or omits crucial information, such as downplaying the risks of an investment or failing to disclose exorbitant fees and a lack of liquidity.

Failure to Supervise

Brokerage firms have a legal obligation to supervise their employees. When a firm’s compliance systems fail, the firm itself can be held liable for the losses caused by its brokers.

The Path to Recovery: Navigating FINRA Arbitration Nationwide

Disputes with your brokerage firm are typically resolved through FINRA’s mandatory arbitration process, not in a traditional court of law. This forum is private, efficient, and binding. Bakhtiari & Harrison represents clients in FINRA arbitrations across the United States. The process generally involves:

Filing the Statement of Claim: A detailed document outlining the facts of your case, the misconduct that occurred, and the damages you have suffered.
Arbitrator Selection: A neutral panel of one or three arbitrators is selected to hear the case.
Discovery: Both sides exchange relevant documents and information. We handle this entire process, building your case with critical evidence from the brokerage firm.
The Final Hearing: A private trial where we present your case, cross-examine the broker and firm executives, and argue for a monetary award to make you whole.

This entire process is conducted with the utmost privacy, protecting your personal financial information from the public record.

Why Choose Bakhtiari & Harrison? Elite, Nationwide Representation

When the stakes are this high, you need a dedicated advocate who understands the nuances of your world. Bakhtiari & Harrison is a boutique securities litigation firm providing a level of personal service and sophisticated counsel that HNW individuals expect and deserve.

Nationally Recognized, Award-Winning Attorneys: Our lawyers are not just experienced; they are leaders in their field. The attorneys at Bakhtiari & Harrison are consistently recognized by their peers and prestigious legal publications as top-rated securities litigators. This peer-reviewed validation is a direct reflection of our deep expertise, ethical standards, and relentless dedication to our clients’ success.
A National Practice with a Personal Touch: Our reach is national, but our service is intensely personal. We have successfully represented investors from New York, Florida, Texas, Illinois, and California, among other states, against the largest Wall Street firms. We provide the same high-touch, bespoke service to every client, regardless of their location.
Discretion is in Our DNA: We understand that your privacy is paramount. Our entire process, from the first call to the final resolution, is designed to protect your confidentiality.
A Record of Success in High-Stakes Cases: Our focus is singular: recovering investment losses for wronged investors. We have a proven track record of securing significant, multi-million dollar awards and settlements. This isn’t just what we do; it’s all we do.

A Seamless Collaboration with Your Trusted Team

We recognize that you are surrounded by a team of trusted professionals. Our approach is not to disrupt this ecosystem, but to integrate with it seamlessly, whether they are in Los Angeles, Miami, or Chicago. We are adept at working collaboratively with your Business Managers, CPAs, Personal and Estate Planning Attorneys, Publicists, and Personal Assistants. We become a specialized extension of your existing team, bringing focused expertise to solve a specific and critical problem.

Protecting Your Legacy, Wherever You Are

You spent a lifetime building your wealth. You should not have to suffer in silence because a trusted advisor violated their duties. Taking action is about accountability and reclaiming the financial security you worked so hard to achieve.

At Bakhtiari & Harrison, we provide the sophisticated legal counsel, tenacious advocacy, and white-glove service that high-net-worth individuals require. With a team of top-rated attorneys and a national reach, we have the experience and resources to hold Wall Street accountable.

No matter where you are in the United States, we invite you to contact us for a confidential, no-obligation consultation. Let us help you take the first step toward protecting your legacy and recovering your assets.