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.

Investment Fraud: What Can You Do If You Are A Victim?

Being the victim of investment fraud can be a devastating experience. You trusted someone with your hard-earned money, only to find out that they deceived you for their own financial gain.

The financial and emotional toll can feel overwhelming, but it’s important to know that you have legal recourse. There are steps you can take to recover your losses, hold the fraudster accountable, and protect your future. In this blog, we will talk about what to do if you fall victim to investment fraud. We will also explain how to navigate the recovery process.

Recognizing Investment Fraud

Investment fraud can happen in many ways. It usually involves someone making false promises or misleading statements. They use tricks to convince you to invest. Some common types of investment fraud include:

Ponzi schemes: These schemes use new investors’ money to pay returns to earlier investors, giving the illusion of a profitable business.
Pyramid schemes: In this fraudulent structure, participants earn money primarily from recruiting others rather than from legitimate investment products.
Broker fraud: This occurs when a broker mismanages funds or gives false advice for personal gain.
Insider trading: When individuals use confidential information to trade stocks or other securities, profiting at the expense of other investors.

Once you realize that someone has defrauded you, your next steps play a crucial role in determining the outcome of your case.

Step 1: Gather Evidence

The first step you should take if you suspect you’ve been defrauded is to gather all the evidence related to the investment. This includes:

Emails, text messages, or written communication between you and the alleged fraudster.
Account statements showing how much you invested and any returns you received.
Contracts or agreements you signed as part of the investment.
Promotional materials such as brochures or advertisements that may have misrepresented the investment.

The more documentation you have, the stronger your case will be when it comes to proving the fraud. Keep all records organized and in a safe place.

Step 2: Report the Fraud

Once you have gathered your evidence, the next step is to report the fraud to the appropriate authorities. Reporting the fraud can start an investigation. This may help you get back your losses or give more evidence for your case. Here are some entities you should consider contacting:

The Securities and Exchange Commission (SEC): The SEC regulates securities markets and investigates fraud cases involving stocks, bonds, and other securities.
The Financial Industry Regulatory Authority (FINRA): FINRA is responsible for regulating brokers and can investigate cases of broker misconduct or fraudulent practices.
State securities regulators: Each state has its own securities regulatory body that can assist with cases of investment fraud under state law.

You can also file a complaint with the Federal Trade Commission (FTC) or the Consumer Financial Protection Bureau (CFPB). This is important if the fraud involved tricks that are not part of regular securities investments.

Step 3: Contact an Investment Fraud Attorney

Investment fraud cases can be complex, and navigating the legal landscape can be challenging without the right expertise. Contacting an attorney with experience in securities law can help you understand your legal rights and options. A lawyer can help you:

Evaluate your case: An experienced attorney will assess whether you have a valid claim for investment fraud and what evidence is needed to proceed.
File a lawsuit: If the fraudster can be held accountable in civil court, your lawyer can help file a lawsuit seeking damages.
Arbitration or mediation: Many investment agreements include clauses that require disputes to go through arbitration or mediation rather than a court trial. Your lawyer can guide you through these processes.

Legal representation can make a significant difference in your ability to recover lost funds and hold the fraudster accountable.

Step 4: Pursue Legal Action or FINRA Arbitration

Once you’ve connected with an attorney and gathered sufficient evidence, the next step is to pursue legal action. Depending on the details of the fraud, you may have several legal avenues to explore:

Securities fraud lawsuit: If the fraud involved misleading or deceptive practices in the sale of securities, you may be able to file a claim under federal or state securities laws.
Breach of fiduciary duty: If the fraud was perpetrated by a financial advisor or broker, you might have a claim based on a breach of fiduciary duty. Investment professionals are required to act in the best interests of their clients, and failing to do so can lead to legal liability.
Negligence or misrepresentation: If the fraud involved negligent behavior or false statements, you could file a claim for damages based on these grounds.

The goal of these actions is to recover your financial losses. In some cases, we may also seek punitive damages against the fraudster.

Step 5: Protect Yourself Going Forward

Recovering from investment fraud can be a long and tough process. After you take legal action, it’s important to protect yourself from future risks. Here are some tips for safeguarding your investments in the future:

Research thoroughly: Before investing, research the person or entity offering the investment. Check their background, reputation, and any regulatory history with agencies like the SEC or FINRA.
Be wary of too-good-to-be-true promises: High returns with little or no risk are often red flags for investment fraud.
Consult with a professional: If you’re unsure about an investment opportunity, consult with a trusted financial advisor or attorney before committing.

Why Investment Fraud Attorneys at Bakhtiari & Harrison?

If you believe you’ve been a victim of investment fraud, it’s important to act quickly. The sooner you take steps to address the fraud, the better your chances of recovering your losses. At Bakhtiari & Harrison, we are committed to helping victims of investment fraud hold those responsible accountable. Contact us today to discuss your case and explore your legal options. We’re here to help you take the next step in your recovery.