Understanding the Unique World of Securities Law
At Bakhtiari & Harrison, we frequently encounter individuals and firms facing complex challenges within the financial services industry. A question that often arises, and one that underscores the specialized nature of our practice, is: “What is a FINRA attorney?” This position extends beyond a simple legal designation; it represents a comprehensive examination of a unique and often complex area of law. Such attorneys, including investment fraud lawyers, require an esoteric skill set, profound industry knowledge, and an astute understanding of both regulatory frameworks and the practical dynamics of the financial markets.
How Does a FINRA Attorney Differ from Other Attorneys?
To truly grasp what a FINRA attorney is, it is important to understand how they differ from other legal professionals. Consider a general litigator who deals with a wide array of issues, from car accidents to contract disputes, covering a broad range of legal fields. A FINRA attorney, on the other hand, has a more targeted practice. Their work is primarily centered around issues governed by the Financial Industry Regulatory Authority (FINRA), which is the largest independent regulator overseeing all securities firms conducting business in the United States.
This concentration means a FINRA attorney isn’t just familiar with the law; they are intimately acquainted with the rules of the securities industry, the customs that govern interactions between brokers and clients, and the procedures unique to FINRA’s dispute resolution forums. Other attorneys might understand contract law, but a FINRA attorney understands how an investment advisory agreement intersects with FINRA Rule 2090 (Know Your Customer) or Rule 2111 (Suitability). They are not just litigators; they are securities litigators, arbitrators, and regulatory counsel.
For example, while a general civil attorney might be proficient in discovery under state or federal rules of civil procedure, a FINRA attorney understands that depositions are generally not permitted in FINRA arbitration, and that discovery operates under a unique framework of written requests for information and documents. This fundamental difference alone highlights the specialized knowledge required.
The Importance of Industry Standards and Customs
One of the most critical differentiators for a FINRA attorney is their profound understanding of the standards and customs within the securities industry. This goes beyond simply knowing the letter of the law. It’s about recognizing what constitutes “reasonable diligence” for a financial advisor, understanding the nuances of different investment products, or knowing the typical sales practices associated with certain types of accounts.
Imagine a scenario where an arbitration claim is filed due to an unsuitable investment recommendation. A general attorney might concentrate primarily on the fact that the client suffered a financial loss. In contrast, a FINRA attorney goes further, analyzing various factors such as the client’s financial statements, risk tolerance, investment objectives, age, and overall financial situation at the time of the recommendation. They evaluate these details through the lens of industry standards and FINRA regulations. The understanding is that an investment deemed suitable for one individual might be inappropriate for another, regardless of whether both individuals experienced financial losses.
This understanding is rooted not just in legal texts, but in an intricate familiarity with how brokers operate, how firms oversee their activities, and what constitutes a breach of industry norms beyond mere legal statutes. This comprehensive insight into industry practices empowers a FINRA attorney to effectively represent their clients in investment disputes, whether they are investors seeking recovery or brokers defending their professional standing.
Beware of Attorneys Practicing the “Hot Area of the Law”
The financial markets are dynamic, and with any significant market event, certain areas of law can become “hot.” When a particular investment trend or market downturn leads to a surge in investor complaints, some general practice lawyers, including those unfamiliar with securities law, may be tempted to market themselves as investment fraud attorneys to capitalize on the perceived opportunity. This can be a significant pitfall for clients seeking legal guidance in the complex field of investment-related disputes.
A FINRA attorney focuses on securities law rather than dabbling in it. Their career is dedicated to mastering the complexities of FINRA regulations, the nuances of investment products, and the specific procedures involved in FINRA arbitration and enforcement. Attorneys who abruptly decide to offer legal representation in FINRA cases without this concentrated expertise may lack the necessary depth of knowledge and experience to secure the best outcomes.
They might be unfamiliar with the subtle distinctions between different types of brokerage accounts, the implications of various regulatory filings, or the unwritten rules governing the FINRA arbitration forum. Therefore, when seeking legal representation from a FINRA attorney, it is crucial to select a professional whose practice is clearly focused on securities matters, rather than someone who is simply following a current trend.
The Value of Industry Experience: More Than Just a Law Degree
The most effective FINRA attorneys often bring more to the table than just a law degree. Look for an attorney who has worked in the securities industry, either as a lawyer for a brokerage firm, a former stockbroker or advisor who later became a lawyer, or an attorney who has been actively involved with FINRA, perhaps serving on a committee like the FINRA National Arbitration and Mediation Committee (NAMC).
This direct experience provides an invaluable perspective. A former in-house counsel for a brokerage firm, part of a legal team within financial institutions, understands the internal workings of these organizations, their compliance procedures, and how they defend against claims. A former stockbroker or advisor who transitioned into the practice of law brings firsthand knowledge of sales practices, client interactions, and the pressures faced by financial professionals.
An attorney with FINRA committee experience possesses an insider’s view of how the organization functions, how rules are interpreted, and the perspectives of arbitrators. This practical experience translates into a more insightful and strategic approach to cases, whether they are addressing financial losses for individual investors, investment professionals, or representing individual brokers. They understand the industry’s vernacular, the motivations of the parties involved, and the practical implications of various legal strategies. This level of insight is almost impossible to gain solely through traditional legal education.
Knowledge and Experience with the FINRA Code of Arbitration
Central to the practice of a FINRA attorney is an extensive knowledge of the FINRA Code of Arbitration. This code is the procedural bible for almost all disputes between investors and brokerage firms, and between brokers and their former firms. It dictates everything from how a claim is initiated to how an award is rendered.
A skilled FINRA attorney will possess an in-depth understanding of the Code’s rules, not just in theory but also in their practical and strategic applications. They excel at managing the specific requirements for filing a Statement of Claim, drafting a persuasive Answer, and adhering to the timelines and deadlines outlined by the Code. This expertise extends far beyond simple memorization; it involves a profound grasp of how the Code is enforced in actual arbitration hearings. Such expertise enables them to anticipate potential obstacles and skillfully use procedural rules to benefit their client during arbitration hearings.
At Bakhtiari & Harrison, the team of experienced FINRA attorneys is renowned for their exceptional and successful track record in navigating the complexities of financial regulations and securities law. With years of dedicated practice, they have adeptly represented a myriad of clients in arbitration and enforcement actions, earning a reputation for both tenacity and strategic acumen. Their proficiency extends across a diverse range of cases, consistently demonstrating an ability to deliver favorable outcomes through meticulous preparation and deep understanding of the financial industry’s legal landscape.
The firm prides itself on its commitment to efficiency and client-focused service, ensuring that each case is handled with the utmost precision and attention to detail. By leveraging their comprehensive knowledge and experience, the FINRA attorneys at Bakhtiari & Harrison offer unparalleled advocacy and guidance, making them a trusted partner for individuals and institutions facing complex financial disputes.
Navigating the FINRA Arbitration Process: A Detailed Look
The FINRA Dispute Resolution Services arbitration process is a unique mechanism for resolving a variety of matters, including potential matters, setting it apart from traditional court litigation. A proficient FINRA attorney possesses a comprehensive understanding of each stage:
Arbitration Agreements: The Gateway to FINRA
Most investor accounts with brokerage firms contain pre-dispute arbitration agreements. These agreements, typically found in the new account opening documents, mandate that any disputes be resolved through FINRA arbitration rather than in court. A FINRA attorney understands the enforceability of these agreements, their scope, and any potential exceptions or limitations. They will review these agreements carefully to determine the proper forum for the dispute and advise their clients accordingly.
How Discovery Works in FINRA: A Unique Landscape
One of the most notable differences between the securities arbitration process conducted under FINRA and court litigation is the discovery process. Unlike in court cases, depositions are generally not permitted in FINRA arbitration. This means parties cannot compel witnesses to provide sworn testimony outside of the hearing. Instead, the discovery process primarily relies on written discovery requests and requests for information and documents.
A proficient FINRA attorney, who often serves as an arbitration attorney, is adept at drafting comprehensive and targeted discovery requests to ensure that all relevant information is acquired from the opposing party. They are also well-versed in responding to such requests, asserting appropriate objections where necessary, while ensuring compliance with FINRA’s discovery guidelines. This distinct discovery framework necessitates a strategic approach that diverges from the one used in traditional litigation, making it crucial to handle disputes through arbitration with skill and expertise.
No Demurrers or Summary Judgments: Get Ready for the Hearing
Another key distinction is the absence of certain pre-hearing motions common in court. Generally, there are no demurrers or motions for summary judgment in FINRA arbitration. This means that cases are rarely dismissed on the pleadings or on a summary review of the evidence before a full hearing. This characteristic underscores the importance of thoroughly preparing for the final hearing, as the opportunity to resolve the case through pre-hearing motions is significantly limited. A FINRA attorney understands that the focus will inevitably shift towards presenting a compelling case at the final hearing.
Pleading a Statement of Claim or Answer: Precision and Persuasion
The Statement of Claim (for investors) or Answer to the Statement of Claim (for brokerage firms/brokers) is a foundational document in FINRA arbitration. A skilled FINRA attorney expertly crafts these documents. For investors, this involves drafting a clear, concise, and compelling narrative that not only outlines the facts but also highlights issues such as broker misconduct, investment losses, broker negligence, and unsuitable investment advice.
These elements help articulate the legal theories and specify the damages sought, including any negative impact on the investment portfolio. For respondents, it requires a robust defense that directly addresses these allegations, presents affirmative defenses, and includes counter-claims where applicable. These documents set the stage for the entire arbitration process and demand a deep understanding of both the legal principles involved and the practicalities of presenting the case to arbitrators.
Arbitrator Selection: A Strategic Imperative
The selection of independent arbitrators is one of the most critical stages in the FINRA dispute resolution process. Parties are provided with lists of potential arbitrators, and each side has the opportunity to strike and rank their preferences. A FINRA attorney possesses an in-depth understanding of the FINRA arbitrator roster, including their professional backgrounds, prior arbitration experience, and tendencies. They will meticulously research potential arbitrators, considering factors such as their industry experience, any past awards, and their perceived biases. Strategic arbitrator selection can significantly impact the outcome of a case within the FINRA dispute resolution process.
The 20-Day Exchange: Preparing for the Final Hearing
The “20-Day Exchange” (FINRA Rule 12514) is a vital pre-hearing process in which parties must share witness lists, exhibits, and any pre-hearing briefs at least 20 days prior to the final hearing. A FINRA attorney, leveraging their legal experience, meticulously orchestrates this exchange to ensure all necessary documents are submitted and a comprehensive presentation is prepared. This exchange serves as a blueprint for the final hearing, underscoring the critical importance of extensive preparation that begins long before the arbitration proceedings commence.
Due Diligence: Reviewing an Attorney’s Website and Track Record
When seeking a FINRA attorney, it’s essential to conduct thorough due diligence. A good practice is to review an attorney’s website and determine whether they exclusively practice securities law. As discussed, specialization is key. If their website lists a wide array of practice areas that have no connection to securities law, it should raise a red flag. A dedicated FINRA attorney will prominently feature their securities law practice, demonstrating a clear commitment to this specialized field.
Furthermore, a truly dedicated FINRA attorney’s website will likely include articles, blog posts, or resources related to FINRA arbitration, securities regulations, and investor protection. This demonstrates their ongoing engagement with the field and their desire to educate the public.
Another critical step is to review the FINRA website to determine the number of arbitrations an attorney has handled. FINRA provides a public record of arbitration awards, which often identifies the attorneys involved in the case. While not a perfect metric, reviewing an attorney’s involvement in past FINRA arbitrations can provide insight into their experience level and willingness to take cases to a final hearing.
Does the Attorney Go to the Final Hearing or Settle Cases?
This is a subtle yet crucial question, reflecting an attorney’s reputation within the securities industry. Defense firms and regulators are aware of attorneys’ reputations and know whether they typically settle or proceed to a final hearing.
An attorney who consistently settles cases, even when the facts might warrant a stronger push for a hearing, can inadvertently develop a reputation that may hinder their clients’ interests. Opposing counsel, whether representing brokerage firms or FINRA, may be less inclined to offer favorable settlement terms if they believe the attorney will ultimately avoid a final hearing at all costs.
Conversely, a FINRA attorney with a reputation for being willing and able to take cases to a final hearing, and who has a track record of success at those hearings, often commands more respect and can secure better settlement outcomes for their clients. This doesn’t mean that every case should go to a hearing; indeed, a good FINRA attorney knows when settlement is the most prudent and beneficial course of action.
However, the option and the readiness to go to hearing are powerful negotiating tools. It demonstrates that the attorney is prepared to fight for their client’s rights and is confident in their ability to present a winning case to a panel of arbitrators. This reputation is built over years of dedicated practice and successful outcomes in the FINRA arbitration forum.
The Indispensable Role of a FINRA Attorney 
In summary, a FINRA attorney is far more than just a lawyer. They are a highly specialized legal professional with an intimate understanding of the securities industry, its regulations, and its unique dispute resolution mechanisms. Whether representing investors who have suffered losses due to negligence or misconduct, or advocating for stockbrokers in regulatory proceedings, expungement matters, or transitions, the expertise of a dedicated FINRA attorney is indispensable.
Their unique blend of legal knowledge, industry experience, and procedural mastery ensures that clients navigate the complex world of securities law with the best possible guidance and advocacy. At Bakhtiari & Harrison, we take pride in being precisely that: dedicated FINRA attorneys committed to protecting our clients’ interests in this highly specialized arena.
Bakhtiari & Harrison
Bakhtiari & Harrison is a premier nationwide law firm, focused on representing clients in resolving securities industry-related disputes through arbitration and state and federal court litigation. The firm’s partners have extensive experience in securities, employment, and regulatory matters. Our focus is on delivering strategic and creative client-centric solutions.
We represent individuals and institutions in securities arbitration and litigation claims before FINRA (Financial Industry Regulatory Authority), AAA (American Arbitration Association), other arbitration providers, and in state and federal courts. The firm represents financial services professionals, registered investment advisors, and broker-dealers in employment matters, industry disputes, and regulatory investigations.
Frequently Asked Questions About FINRA Arbitration and FINRA Attorneys
1. What does a FINRA attorney do for investors?
A FINRA attorney representing investors helps individuals who have lost money in the stock market due to actions such as negligent advice, unsuitable investment recommendations, churning, misrepresentations, or unauthorized trading by their financial advisor or brokerage firm. They file and prosecute claims on behalf of investors through the FINRA arbitration process, seeking to recover damages for their losses.
2. What does a FINRA attorney do for stockbrokers?
A FINRA attorney representing stockbrokers assists financial professionals with a range of legal and regulatory issues. This includes defending them in FINRA regulatory proceedings (e.g., investigations, disciplinary actions), handling expungement matters to clear their BrokerCheck records, providing guidance during transitions between firms, and advising on the purchase or sale of a book of business.
3. Are arbitrators employed by FINRA?
No, FINRA arbitrators are not employees of FINRA. They are independent contractors who serve on a roster and are selected by the parties to hear and decide disputes. FINRA administers the arbitration process, but the arbitrators themselves are neutral third parties drawn from various professional backgrounds.
4. What are the qualifications to be a FINRA arbitrator?
FINRA arbitrators must meet specific qualifications, including having at least five years of paid work experience and a college degree or its equivalent. They undergo training provided by FINRA and are classified as either “public” arbitrators (those with no significant ties to the securities industry) or “non-public” arbitrators (those with a professional background in the securities industry). In most investor-brokerage firm disputes, a majority of the arbitration panel must be public arbitrators.
5. Could you appeal a FINRA arbitration award?
Appealing a FINRA arbitration award is extremely difficult and rarely successful. Arbitration awards are considered final and binding. Courts will only overturn an award under very limited circumstances, such as if there was fraud, corruption, evident partiality by an arbitrator, or if the arbitrators exceeded their powers. It is not an avenue for simply relitigating the merits of the case.
6. What is the average duration of a FINRA arbitration?
The duration of a FINRA arbitration can vary significantly depending on the complexity of the case, the amount in controversy, and the cooperation of the parties. Simple cases may resolve within 12-18 months, while more complex cases involving significant damages or multiple parties can take 24 months or even longer, from the initial filing of the Statement of Claim to the issuance of an award.
7. How much does a FINRA attorney cost?
The fee structure for a FINRA attorney can vary. For investors, many FINRA attorneys work on a contingency fee basis, meaning their fee is a percentage of the amount recovered. This means if there is no recovery, there is no attorney’s fee. For stockbrokers, fees are typically hourly, or a flat fee may be negotiated for specific services like expungement or regulatory defense. It’s crucial to discuss the fee arrangement upfront with any prospective FINRA attorney.
8. What is the “BrokerCheck” system?
BrokerCheck is a free online tool provided by FINRA that allows investors to research the professional backgrounds of current and former FINRA-registered brokerage firms and brokers. It provides information on their licensing, employment history, disciplinary actions, and customer complaints. A FINRA attorney often helps brokers navigate issues related to their BrokerCheck report, particularly expungement.
9. What is an “expungement” in FINRA arbitration?
Expungement is the process by which a broker seeks to remove customer dispute information from their BrokerCheck record. This is typically done through a FINRA arbitration proceeding where a broker requests that arbitrators recommend the expungement of certain customer complaint disclosures. A FINRA attorney is essential for navigating this complex process, as specific legal grounds must be met, and the broker must often present a compelling case to the arbitration panel.
10. Why is it important to choose a specialized FINRA attorney?
Choosing a FINRA attorney is crucial because securities law and FINRA arbitration have unique rules, procedures, and industry customs that differ significantly from other areas of law. An attorney who concentrates on FINRA matters possesses the in-depth knowledge, practical experience, and strategic insights necessary to effectively represent clients and navigate the complexities of the FINRA dispute resolution system, maximizing the chances of a favorable outcome.