Investors often find themselves in disputes with brokerage firms over their investments. Understanding how to resolve these issues effectively can seem daunting, particularly regarding the securities arbitration process.
Securities arbitration offers a way to settle disputes outside of the traditional court system, but it comes with its own set of rules and requirements. Knowing who is eligible to file, the costs involved, and the role of organizations like FINRA is crucial for investors looking to recover losses.
In this article, we will explore the ins and outs of securities arbitration, the importance of having professional legal counsel, and how investors can navigate this intricate process effectively.
Eligibility to File Securities Arbitration Claims
Investors with a U.S. brokerage account can file a securities arbitration claim. This is true no matter your citizenship or where you live. The arbitration process is binding, which means brokerage firms cannot keep appealing to drag out the case and increase your legal costs. An essential requirement is to sign a contract with a standard arbitration clause. This clause binds you to the FINRA arbitration process. Claims are typically handled within a year, making arbitration faster than going to court. If you cannot afford a lawyer, you might qualify for help through securities arbitration clinics. These clinics have specific criteria you need to meet to receive assistance.
Types of Investors Who Can File
Any investor with a U.S. brokerage account can file a securities arbitration claim regardless of citizenship or residence. This includes individual and institutional investors like retail investors, ultra-high-net-worth individuals, family offices, pension plans, and funds of funds. An arbitration clause in your contract is required to participate in the FINRA arbitration process. This is the main way to resolve disputes with brokerage firms or financial advisors. Filing a securities arbitration claim lets you address issues such as fraud, negligence, breach of contract, and breaches of fiduciary duty by financial institutions.
Key Criteria for Eligibility
Each securities arbitration clinic has its own criteria for whom it can support. These criteria often include income limits and claim amounts. Law schools often offer clinics for those with smaller claims, excluding employment disputes. It’s up to you to check if you meet a clinic’s eligibility requirements. Even if your state isn’t specifically listed, you could still receive help from certain clinics. Law students, under the guidance of experienced attorneys, provide legal representation. This ensures that qualified investors have the support they need during the arbitration process.
Understanding the Costs of Securities Arbitration 
Navigating the costs of securities arbitration can be challenging for investors. This form of dispute resolution offers an alternative to court litigation. However, it comes with its own set of expenses. From filing fees to attorney charges, understanding these costs can help investors prepare for arbitration proceedings.
Filing Fees
Filing fees are the first expense investors face in securities arbitration. These fees depend on the amount of the claim. For claims over $25,000, the fees can range from $600 to $2,250. When filing a statement of claim, investors must also pay a hearing session deposit. This deposit helps cover arbitrator compensation. It, too, varies with the size of the claim.
Investors should note that additional fees may apply. For example, requesting an explained decision after a hearing costs $400 extra. At law firms like Zamansky LLC, securities arbitration lawyers often charge a contingency fee. This aligns with the amount recovered for the client.
Attorney Fees
Attorneys in securities arbitration often work on a contingency fee basis. This means clients pay fees only if they recover money. If the arbitration is unsuccessful, no legal fees will be owed. This arrangement aims to align the interests of both the attorney and the investor.
On an hourly basis, legal fees can add up quickly. For a regular three-day arbitration hearing, costs might range from $36,000 to $48,000. This assumes an attorney rate of $400 per hour. Some cases may even require over 200 hours of legal work. This is especially true if discovery disputes arise, leading to additional legal proceedings.
Other Potential Costs
Various other costs can occur during securities arbitration. Here are a few potential expenses to consider:
- Copying and FedEx Charges: Minor, but they add up over time.
- Travel Costs: These are necessary if hearings require traveling.
- Expert Witness Fees: Depending on the case complexity, they can range from $3,000 to $15,000.
- Incidental Costs: Hearing exhibits might cost around $500, with additional expenses for long-distance calls and photocopying.
Sometimes, damages awarded in arbitration can help cover these legal costs. This is in addition to any compensation for lost investments.
Overall, understanding these fees can help investors better prepare for the securities arbitration process. While they can be significant, they also reflect the complexities often involved in resolving securities disputes.
The Role of FINRA in Securities Arbitration
FINRA, or the Financial Industry Regulatory Authority, plays a key role in securities arbitration. It regulates almost 4,700 brokerage firms and over 635,000 registered securities representatives in the U.S. FINRA offers arbitration as an alternative to traditional court litigation as a self-regulatory organization. Investors often have to resolve disputes through FINRA’s arbitration process due to agreements in their brokerage accounts. This arbitration is usually faster, cheaper, and less burdensome than going to court.
FINRA has recently made improvements to make the process fairer. One such change is the option for all-public arbitration panels. These panels consist of individuals without ties to the securities industry, which helps enhance fairness for investors.
Overview of FINRA’s Function
FINRA is the largest independent securities regulator in the U.S., authorized by Congress to oversee the industry. It ensures fair operations among approximately 4,700 brokerage firms, 167,000 branch offices, and 635,000 registered securities representatives. FINRA’s key goal is to protect investors from fraud and promote market integrity.
FINRA also runs the largest dispute resolution forum for securities disputes. This forum offers an arbitration process as an alternative to litigation. Investors typically have to bring claims for compensation through FINRA Dispute Resolution Services instead of the Investor Complaint Center.
How FINRA Facilitates the Arbitration Process
FINRA provides a neutral ground for arbitration where investors, brokerage firms, and brokers can settle disputes. The process starts when an investor submits a Statement of Claim. This document outlines the dispute, parties involved, and damages sought.
Here’s a brief look at the steps in the arbitration process:
- Submit Statement of Claim: Initiates the dispute resolution.
- Selection of Arbitrators: Parties rank potential arbitrators, and FINRA chooses them to ensure neutrality.
- Arbitration Hearings: Where both parties present their cases.
- Award Decision: The arbitrator makes a final, binding decision.
FINRA manages this process while ensuring its staff doesn’t judge disputes, maintaining impartiality throughout. The arbitrator’s decision is final, with little room for challenge in court. This structured process ensures disputes are handled fairly and efficiently.
How Investors Can Recover Losses Through Arbitration
Securities arbitration offers a path for investors to reclaim losses. It serves as an alternative to traditional courts, providing a quicker, less costly resolution. Arbitration often involves a panel of experts familiar with securities law. Many investors have already agreed to arbitration through account agreements with brokerage firms. This process is a major forum for disputes involving investors and financial professionals. Hiring a skilled securities arbitration lawyer can boost your chances of recovering losses.
Steps to Take Before Filing
- Prepare a Statement of Claim: This document describes the dispute, the involved parties, and the damages you seek.
- Pay the Filing Fee: Fees are based on your claim size. Claims over $25,000 may range from $600 to $2,250.
- Engage in Discovery: Both sides collect documents and information to support their case.
- Follow FINRA Rules: Understanding these rules is crucial for compliance throughout the process.
- Final Hearing: A hearing is held about 12 to 18 months after filing the claim. Cases over $100,000 typically involve three arbitrators.
Types of Compensation Available
Investors can receive various compensations through arbitration. Legal fees often work on a contingency basis, meaning you pay only if you win. Upfront costs include a filing fee and a hearing deposit, ranging from $600 to $2,250. Lawyers may also charge for out-of-pocket expenses but typically keep these transparent. Compensation can cover losses due to unsuitability, misconduct, or breach of fiduciary duty. Successful claims can result in significant awards, underscoring the seriousness of your case in the arbitration process.
What to Expect During Arbitration Hearings
Arbitration hearings offer a structured yet flexible way to resolve disputes. They’re similar to civil trials but with less formal rules. Both sides can make opening statements, present evidence, and call witnesses. Each witness testifies under oath to keep the process fair. The entire arbitration hearing is recorded. Once the hearing concludes, an arbitrator or a panel makes a decision within 30 days and sends it to the parties by mail. These hearings usually last two to three days and may include expert testimony, especially when dealing with complex financial issues.
Overview of the Hearing Process
The final arbitration hearing typically occurs in a conference setting. Similar to a trial, each side presents their case using testimony and documents. Both parties start with opening statements. They continue with witness questioning and end with closing statements. Most hearings last two to four days, depending on how many witnesses are involved. Each party can present arguments and call expert witnesses. They also cross-examine any opposing witnesses. To keep the process fair, claimants should avoid private chats with arbitrators before and during the hearing.
How Evidence is Presented
In a FINRA arbitration hearing, evidence presentation is key. The party making a claim, often the broker, presents first. Then, the investor’s lawyer gets a turn. These hearings may last a single day or stretch into several days. Both sides must have time to present their evidence and any rebuttals. After the hearing ends, the arbitration panel decides in private. A verdict is mailed to both parties within 30 days. Before the hearing, there’s a discovery phase. During this phase, lawyers can request documents that might support their claims. This could include checking financial records.
The Role of Arbitrators
Arbitrators play a critical role in arbitration proceedings. They are chosen to resolve legal and factual issues but are not bound by legal precedents like judges. This allows them to craft fair solutions using alternative considerations. The arbitration panel can have one or three arbitrators, chosen by the involved parties based on the damages sought. During the process, they review claims, hear arguments, and examine evidence. Their final decision is called an award and is binding to all parties. It can only be challenged in court within a set time frame. All decisions remain confidential, with a copy sent to each party within 30 days.
Debunking Common Myths About Securities Arbitration
Securities arbitration is often misunderstood. Many people believe myths that can prevent them from choosing this effective dispute resolution method. Let’s debunk some of these common misconceptions.
Myth 1: Arbitration is Always Faster than Litigation
It’s true that arbitration cases are usually quicker. Most securities arbitration cases are resolved in less than a year. FINRA arbitration often takes about nine months to a year and a half, which is faster than most court battles. The process begins right after the respondent files an answer, without the delays from motions to dismiss common in court. Moreover, arbitration skips depositions and interrogatories, speeding things up further. Decisions are made just from written documents in cases involving disputes under $50,000, cutting downtime significantly.
Myth 2: You Don’t Need Legal Representation
Some people think they don’t need an attorney for arbitration. This is not the case. Having legal representation can be vital. A securities arbitration attorney knows the ropes and can help present your case effectively. Brokerage firms often hire lawyers, so having an attorney helps level the field. An attorney can assess your claim’s strength and determine if it’s worth pursuing, saving you time and money. They can also help choose arbitrators well-suited for your case by examining FINRA-provided backgrounds. This is especially important for complex legal disputes or big claims, where stakes are high.
Myth 3: Arbitration Outcomes are Unfair
While winning isn’t always easy, experienced securities fraud attorneys can improve your chances. FINRA now offers the option of an “all-public” arbitration panel, removing those with ties to the securities industry. This change aims to make outcomes fairer. Arbitration decisions, being binding, come with fewer appeals compared to court rulings. Though arbitration awards are public, they require searching on FINRA’s website and aren’t easily found via regular search engines. The outcome depends heavily on case presentation and the expertise of the arbitrators. With proper representation and case preparation, a just result is more attainable.
Types of Evidence Attorneys Can Present
In securities arbitration, attorneys can present various types of evidence to support their client’s claims. This evidence can establish facts and demonstrate misconduct by brokers or advisory firms. Here are some key types of evidence that attorneys may present:
Documentation and Records
- Contracts: The agreement between the investor and their brokerage or advisory firm is essential. It lays out the terms and obligations each party must follow.
- Account Statements: These documents from before, during, and after the alleged wrongdoing are important. They show financial activities and potential discrepancies.
- Formal Communications: Letters, disclosures, and notices from brokers are critical. They highlight what was communicated to the investor regarding investments.
- Correspondence: Emails, texts, and voicemails between investors and brokers can reveal potential miscommunications or misconduct.
- Internal Firm Documents: Through discovery, attorneys can obtain internal communications related to the investor’s claims. These might include emails or memos within the firm.
- Examination Reports: Documents from regulators that discuss claims or improper behavior are important evidence.
- Broker Compensation: For claims involving trading, documentation on broker compensation is needed.
- Financial Statements: Investors must provide financial documents and tax returns for up to three years before the disputed transactions.
Expert Witness Testimonies
- Role of Expert Witnesses: Expert witnesses clarify complex financial claims for the arbitration panel. Their insights can greatly influence the panel’s understanding.
- Testimonies: Both parties can call fact and expert witnesses during hearings. These testimonies are under oath and can be cross-examined.
- Quantifying Damages: Expert witnesses often explain the financial impact of alleged misconduct. This helps arbitrators grasp the seriousness of the claims.
Market Analysis
- Arbitration Process: Managed by FINRA, securities arbitration resolves disputes between investors and financial professionals. It’s typically faster and less expensive than court.
- Hiring Seasoned Lawyers: Securities arbitration lawyers offer deep industry knowledge. They navigate complex regulations with ease.
- Evidence Presentation: Contracts, account statements, and internal communications are vital pieces of evidence. They help build a comprehensive case.
- Simplified Hearing: Although streamlined, the arbitration hearing allows for some discovery. The process ends with a binding decision from an arbitrator.
Using these strategies and understanding the evidence can significantly affect securities arbitration cases. The right approach helps investors achieve fair outcomes.
Importance of Hiring a Professional Lawyer for Securities Arbitration
Securities arbitration can be a daunting process for investors seeking justice against financial professionals. This is where the expertise of a seasoned securities arbitration attorney comes into play. A skilled lawyer significantly improves the odds of a positive outcome by expertly navigating the nuances of arbitration, ensuring that investors can effectively present their cases. One of the key advantages of hiring a securities arbitration attorney is that many work on a contingency-fee basis. This means clients only pay legal fees if their attorney successfully recovers money on their behalf. This structure aligns the attorney’s interests with the investor’s, fostering a commitment to a successful resolution without upfront costs.
Experience in Regulatory Breaches
Experienced attorneys, such as those from Bakhtiari & Harrison, are adept at illustrating how an investment professional may have breached regulatory standards. This is crucial for building a compelling case against brokers and financial firms that have committed misconduct. They handle the complexities of arbitration proceedings, ensuring that investors receive a fair recovery based on their claims.
Why Choose Bakhtiari & Harrison?
When choosing legal representation for securities arbitration, Bakhtiari & Harrison stands out as a premier law firm known for its impressive success in recovering millions of dollars for clients. With decades of experience, their skilled attorneys have established a national reputation for providing strategic, client-focused solutions in both securities arbitration and litigation.
Adept At Representing Clients in Arbitration Securities Settings
Bakhtiari & Harrison focuses on a broad spectrum of investment misconduct issues, including stockbroker fraud and breaches of contract. Their comprehensive understanding of the securities industry, combined with an extensive database of arbitrators, empowers them to navigate the complexities of your specific case effectively. Their reputation as trusted advocates is further solidified by their experience representing both investors and financial services professionals in regulatory matters and disputes.
Success in Arbitration and Litigation
The lawyers at Bakhtiari & Harrison possess exceptional skills in advocating for clients within arbitration contexts, consistently ready to advance matters to a formal hearing when the situation demands. Their robust history of achievements across a broad range of arbitration claims equips them with the strategic knowledge needed to handle even the most complex challenges. Furthermore, they are adept at facilitating settlement discussions, giving clients the chance to attain beneficial outcomes without enduring lengthy arbitration proceedings. Investors can rely on their commitment to professionalism and unwavering dedication in managing their cases.
Navigating Complex Regulatory Frameworks
Securities arbitration is governed by intricate regulations that can overwhelm those without legal training. The Financial Industry Regulatory Authority (FINRA) oversees the majority of these proceedings, which often involve arbitration clauses embedded in broker-dealer agreements. These clauses mandate that disputes be resolved through arbitration rather than traditional litigation. For investors, having knowledgeable legal representation is essential in this regulatory maze. The attorneys at Bakhtiari & Harrison possess a deep understanding of these complexities, enabling them to craft solid arguments and confidently navigate the arbitration landscape.
Building a Strong Case for Recovery
To initiate the recovery of losses, investors must work with their attorneys to prepare and submit a statement of claim to FINRA. This essential document outlines the key facts of the case and the relief sought. Throughout the structured arbitration hearing, both parties present their evidence and arguments, after which a panel of arbitrators issues a binding decision. It is crucial to distinguish between filing a securities arbitration complaint and reporting suspected fraud to the FINRA’s Investor Complaint Center; the former seeks monetary compensation, while the latter does not.
With attorney-client privilege securing their communications, investors can candidly assess their case, enhancing the chances of a favorable outcome. In the complex landscape of securities arbitration, partnering with a trusted law firm like Bakhtiari & Harrison can significantly impact the outcome of your case. Their deep experience, track record of success, and adherence to ethical standards enable them to effectively advocate for your rights and secure the justice you seek. Rather than attempting to navigate the multifaceted arbitration processes on your own, rely on Bakhtiari & Harrison to provide you with guidance and support every step of the way. Contact us today.