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.

Should You Invest in Crypto? A Comprehensive Guide

Cryptocurrencies have captured global attention, reshaping how people think about money, investing, and decentralization. From Bitcoin’s meteoric rise to the emergence of thousands of digital coins and tokens, crypto has evolved from a fringe concept into a potentially transformative asset class.

But should you invest in it?

The answer depends on your financial goals, risk tolerance, and understanding of this volatile, rapidly changing space. This guide offers a detailed look at cryptocurrency investing, breaking down what you need to know before getting involved.

What Is Cryptocurrency?

A cryptocurrency is a form of digital currency designed to be secure, decentralized, and often anonymous. It operates through blockchain technology—a type of distributed ledger that records transactions across a network of computers.

The most well-known cryptocurrency, Bitcoin, launched in 2009. Since then, thousands of others have emerged, including Ethereum, Litecoin, and newer innovations like Solana and Avalanche. Some are built for everyday transactions, while others serve specific roles in decentralized finance (DeFi), gaming, or digital identity verification.

Key Benefits of Investing in Crypto

1. Potential for High Returns

Cryptocurrencies are known for their volatility, which, while risky, can result in impressive gains. Bitcoin’s journey from under $1 to tens of thousands of dollars per coin illustrates how early adopters can see exponential returns.

While future growth isn’t guaranteed, investors with high risk tolerance may find it’s upside appealing.

2. Portfolio Diversification

Cryptocurrency assets often behave differently than traditional markets. While not entirely uncorrelated, they provide an alternative investment avenue that can diversify a portfolio. Investors seeking exposure outside of stocks, bonds, and real estate might consider allocating a small percentage.

3. Decentralization and Transparency

Because most cryptocurrencies are built on open-source blockchain networks, transactions are transparent, traceable, and not controlled by any government or central bank. For those concerned about inflation or traditional financial system risks, it can offer a decentralized alternative.

4. Technological Innovation

Investing also means investing in technology. Blockchain applications go beyond digital currency—they’re disrupting sectors like supply chains, insurance, real estate, and entertainment. Investors who believe in these technological advancements may want early exposure to projects fueling these changes.

5. Access and Liquidity

Markets operate 24/7, allowing you to buy and sell anytime, from anywhere. This level of accessibility appeals to investors looking for flexibility. Most major cryptocurrencies are highly liquid, with deep order books and active trading communities.

Key Risks to Consider

1. Volatility

Cryptocurrencies are extremely volatile. Prices can swing by double digits in a matter of hours, influenced by macroeconomic news, regulation, sentiment, and even tweets. This makes crypto unsuitable for investors who can’t stomach significant short-term losses.

2. Regulatory Uncertainty

Crypto regulation remains in flux. Governments around the world are evaluating how to monitor, tax, and regulate crypto markets. Sudden changes in legal status, tax codes, or enforcement can have an immediate impact on prices and access.

3. Security Vulnerabilities

While blockchain is secure, users must protect their private keys and digital wallets. Loss of access due to hacks, scams, or forgotten credentials is irreversible. Even well-known exchanges have experienced security breaches.

4. Limited Consumer Protections

There’s little to no recourse in most jurisdictions if a crypto transaction goes wrong. Unlike banks or regulated brokerages, decentralized networks don’t offer account insurance or fraud protections. Once a transaction is made, it cannot be reversed.

5. Complexity

The crypto ecosystem is notoriously complex. Between wallets, exchanges, keys, gas fees, and consensus mechanisms, new investors face a steep learning curve. Misunderstandings can lead to costly mistakes, such as sending funds to the wrong address.

Tax Implications

Cryptocurrencies are typically considered taxable property. Selling, trading, or converting crypto into fiat can result in capital gains taxes. Even using crypto to buy goods and services may trigger a taxable event. Accurate recordkeeping and professional tax guidance are essential.

Practical Steps for Getting Started

1. Educate Yourself

Before investing, take the time to learn about the basics of blockchain technology, different crypto use cases, and how exchanges and wallets work. Watch videos, read whitepapers, and join community discussions to get a well-rounded understanding.

2. Choose a Secure Exchange

To purchase crypto, you’ll need to use a trading platform or exchange. Choose one with a solid reputation, strong security practices, and responsive customer support. Look for two-factor authentication and cold storage capabilities.

3. Select a Wallet

After purchase, consider moving your crypto to a private wallet. Hot wallets are connected to the internet and convenient for trading, while cold wallets (like hardware wallets) offer stronger protection against theft.

4. Start Small

Due to the high-risk nature of cryptocurrency, consider investing only a small portion of your overall portfolio—an amount you’re willing to lose. Use this initial stake to get familiar with how markets move and how to manage your holdings.

5. Diversify Your Cryptocurrency Holdings

Just as with traditional investing, spreading your investment across multiple cryptocurrencies can reduce risk. Don’t rely solely on Bitcoin or Ethereum—explore smaller-cap tokens, but do your research thoroughly before investing.

6. Monitor Your Investment

Stay informed about market trends, technological updates, and regulation changes. It is fast-moving, and staying passive can be risky. Use portfolio trackers and news aggregators to keep up with developments.

7. Avoid FOMO and Hype

Fear of missing out (FOMO) can lead to impulsive decisions. Be cautious of projects that promise guaranteed returns or go viral overnight. Scams and pump-and-dump schemes are prevalent in the space.

8. Prepare for the Long Term

Despite its volatility, many investors adopt a long-term mindset. Holding through market cycles can mitigate some short-term price swings and allow you to benefit from broader adoption trends.

Who Should Consider Cryptocurrency?

It may appeal to you if:

You’re comfortable with high-risk, high-reward investments.
You have an interest in emerging technologies.
You want exposure to non-traditional assets.
You can absorb potential losses without derailing your financial plan.

However, it may not be a fit if:

You need stable, short-term returns.
You prefer assets with clear income streams or intrinsic value.
You have low risk tolerance or limited investing experience.

Final Thoughts

Investing is not a get-rich-quick scheme. While some investors have realized incredible returns, others have suffered steep losses. The space is still evolving, filled with innovation, disruption, and uncertainty.

Approach this market with a mindset grounded in education, caution, and strategic planning. Don’t invest more than you can afford to lose. Stay skeptical of hype, avoid emotional decisions, and always do your homework before investing in any token or platform.

With the right mindset and preparation, it can be a meaningful—albeit volatile—component of a diversified investment portfolio. For questions or more information, contact Bakhtiari & Harrison. Representing investors in FINRA arbitration, state and federal courts nationwide.