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.

Empowering Investors: Using FINRA BrokerCheck After Advisor Misconduct

If you’ve lost money because of a financial advisor’s misconduct, you’re not alone. Many investors place their trust in advisors, only to experience fraud, negligence, or other misdeeds that lead to financial loss. The good news is there are resources to help you research your advisor’s background and hold them accountable. One key tool is FINRA’s BrokerCheck, a free online database that can reveal an advisor’s history – including any red flags – and empower you with knowledge. In this post, we’ll explain what BrokerCheck is, how it works, and how you can use it to protect yourself and seek justice.

What Is FINRA BrokerCheck?

BrokerCheck is a free tool from FINRA (Financial Industry Regulatory Authority) that lets you research the professional background of brokerage firms, individual brokers, and even investment adviser firms. FINRA is the non-governmental organization that regulates brokerage firms and exchange markets in the U.S. It maintains BrokerCheck as a public service to help investors make informed decisions and to flag potential misconduct. With BrokerCheck, you can look up an individual financial advisor or a brokerage firm and see their employment history, certifications and licenses, as well as any violations or complaints in their record. This information can be invaluable if you suspect wrongdoing or simply want to vet a professional before entrusting them with your money.

BrokerCheck is maintained by FINRA, which is responsible for overseeing brokers and brokerage firms. FINRA requires advisors and firms to report information about their registrations and any disciplinary events. BrokerCheck pulls this data from official regulatory databases and presents it in an easy-to-read report format. It’s an investor’s window into a broker’s regulatory record, giving you a chance to spot problems that might otherwise remain hidden.

Where Does BrokerCheck’s Data Come From?

BrokerCheck’s information is drawn from the central licensing and registration databases used by U.S. regulators. Specifically, data on brokers and brokerage firms comes from the Central Registration Depository (CRD) – the securities industry’s online registration and licensing database. The CRD is fed by information that brokers, firms, and regulators submit as part of the registration process. Whenever a broker joins a firm, leaves a firm, passes an exam, or has a reportable event, the details go into the CRD system.

In addition, BrokerCheck includes data on investment adviser firms and representatives, which comes from the SEC’s Investment Adviser Registration Depository (IARD). This means that if your financial advisor is a registered investment adviser (RIA) rather than a broker, you can still find basic information about them on BrokerCheck (with a link to the SEC’s database for more details). By pulling from these official sources, BrokerCheck ensures you’re seeing up-to-date, accurate information.

BrokerCheck retains individuals’ records for 10 years after they leave the industry, and even longer if they were involved in serious misconduct. Even if your broker is no longer registered, you may still find their record if the misconduct was significant – ensuring past bad actors don’t just vanish from view.

BrokerCheck Reports on Individual Advisors: What Will You Find?

When you search for an individual broker or financial advisor on BrokerCheck, you’ll get a detailed report about their professional background. For advisors who are currently registered (or were registered within the last 10 years), a BrokerCheck report will typically include:

Summary: An overview of the individual’s credentials, registrations, and current employment.
Employment/Registration History: A listing of the brokerage firms where the individual is or was registered, and a 10-year employment history (including both finance-related and other jobs).
Qualifications: A list of the licenses and exams the broker has passed and what products they are qualified to sell.
Disclosure History: This section includes information about customer disputes, disciplinary events, and certain criminal or financial matters involving the individual. This is one of the most critical parts of the report.
Broker Comments: If the broker has submitted a comment to provide context on a disclosure, those comments will appear as well.

By reviewing these sections, you can quickly get a sense of whether an advisor has a clean record or a checkered past. As an investor who has already experienced misconduct, you might unfortunately see that your advisor had prior issues on their record – such as similar customer complaints – which suggests a pattern.

BrokerCheck Reports on Firms: Checking the Brokerage Firm Itself

BrokerCheck isn’t just for individual advisors; it also provides reports on brokerage firms. If your investments were handled through a brokerage company, it’s wise to look up the firm’s report as well. A BrokerCheck report for a brokerage firm contains:

Firm Summary: An overview of the firm’s basic information – where it’s headquartered, how long it’s been in business, and general background.
Firm Profile: Details on when the firm was established and information about the people or entities that own or control the firm.
Firm History: A record of any mergers, acquisitions, or name changes the firm has undergone.
Firm Operations: A list of the firm’s active licenses and registrations, the types of business it conducts, and other operational details.
Disclosure Events: Regulatory actions, arbitration awards, or financial issues on the firm’s record, including pending enforcement actions or allegations.

Reviewing a firm’s report can give you a broader context about the company behind your advisor. If a firm has multiple arbitration awards or regulatory penalties, it suggests systemic problems that may have contributed to your own experience.

Red Flags to Watch for on BrokerCheck

One of the main reasons to use BrokerCheck is to spot red flags that signal potential misconduct or risk. As you comb through a BrokerCheck report, pay special attention to any of the following:

Customer Disputes: Complaints or arbitration claims filed by clients.
Regulatory or Disciplinary Actions: Any action taken by FINRA, the SEC, or state regulators.
Employment Terminations and Internal Reviews: Whether an individual was terminated for cause by a former employer.
Criminal Charges or Convictions: Certain criminal matters, particularly felonies and investment-related misdemeanors.
Financial Troubles: Personal financial problems such as bankruptcy filings or tax liens.

While a single event may not be conclusive, a pattern of complaints or multiple serious disclosures should raise immediate concerns.

Beyond BrokerCheck: FINRA’s Supplementary Databases

BrokerCheck is a powerful starting point, but FINRA also offers two supplementary resources that provide even more transparency:

FINRA Arbitration Awards Online: This database contains the full text of arbitration awards issued by FINRA and other forums. If your advisor or their firm was involved in a customer arbitration case, you can read the arbitrators’ findings.
FINRA Disciplinary Actions Online: A searchable database of disciplinary actions and decisions issued by FINRA since 2005. These include enforcement decisions, hearing panel outcomes, and appeals to the SEC or federal courts.

These tools can give you deeper insight into a broker’s or firm’s past behavior and help build a fuller picture of misconduct.

How to Use BrokerCheck if You’ve Been Wronged

If you believe you were wronged by a financial advisor, here’s how you can leverage BrokerCheck and related information to protect yourself and take action:

Research Your Advisor and Firm: Look up both the advisor and the firm. Print or save their BrokerCheck reports.
Document Everything: Combine the BrokerCheck information with your own documentation, such as account statements and emails.
Consider Filing a Complaint or Arbitration: Use the information you find to support a complaint with FINRA or pursue arbitration.
Seek Legal Counsel: An experienced securities attorney can interpret the disclosures and advise you on next steps. BrokerCheck is an important piece of evidence, but it’s even more effective when paired with expert guidance.

Take the Next Step

If you’ve experienced losses at the hands of a financial advisor, you don’t have to face the consequences alone. BrokerCheck gives you the power to investigate and expose misconduct. But to truly pursue recovery, professional help can make all the difference.

Contact Bakhtiari & Harrison today for a free consultation. Our experienced securities attorneys are here to listen to your story, evaluate your case, and guide you toward recovery. We’ve helped many investors fight back after being wronged by financial professionals – and we’re ready to help you too.

Don’t wait. Let’s talk and explore your options for getting the justice and compensation you deserve.