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.

What is a FINRA OTR? 5 Critical Steps to Take

The world of financial regulation is complex and often difficult to navigate, particularly for professionals in the securities industry. If you have received a request for an On-the-Record (OTR) interview from the Financial Industry Regulatory Authority (FINRA), it is crucial to understand what this means and how it can impact your career.

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Understanding FINRA OTR Interviews

A FINRA OTR is a formal investigative interview conducted by FINRA’s Enforcement Division. As the self-regulatory organization overseeing brokerage firms and securities professionals, FINRA has the authority to investigate potential violations of its rules, federal securities laws, and ethical standards.

These interviews are conducted under oath and recorded, making them a serious matter for anyone involved. The purpose of a FINRA OTR is to gather testimony and evidence regarding suspected misconduct, including but not limited to fraud, misrepresentation, unsuitable recommendations, or other violations of industry regulations.

Why Would FINRA Request an OTR Interview?

A FINRA OTR interview is usually initiated when the agency is conducting an investigation into potential wrongdoing. Common reasons FINRA may request an OTR include:

Customer Complaints – If a client lodges a formal complaint against a broker or firm, FINRA may investigate to determine whether any violations have occurred.
Regulatory Filings – Issues arising from routine disclosures in a Form U4 (Uniform Application for Securities Industry Registration) or Form U5 (Uniform Termination Notice) may trigger an investigation.
Market Manipulation Concerns – If FINRA suspects a firm or individual of engaging in market manipulation, insider trading, or excessive trading (churning), an OTR interview may be conducted.
Failure to Supervise – Supervisory professionals may be called to a FINRA OTR interview if FINRA believes they failed to adequately oversee their representatives.
Enforcement Referrals – An investigation triggered by referrals from other regulatory agencies, such as the SEC or state securities regulators, may result in an OTR interview.

The Serious Nature of an OTR Interview

An OTR interview is not a casual conversation—it is an official legal proceeding. The testimony given can have serious consequences for your career, reputation, and future in the securities industry. If you are called for an OTR interview, it is critical to take the matter seriously and prepare accordingly.

FINRA has broad authority during these interviews. Any statements made can be used as evidence in enforcement actions, leading to sanctions, fines, suspensions, or even permanent bans from the industry. Additionally, lying or providing misleading statements in an OTR interview can lead to severe penalties, including being barred from working in the securities industry altogether.

What Are Your Rights and Obligations?

While FINRA OTR interviews are mandatory, individuals have certain rights during the process. Understanding these rights can make a significant difference in the outcome of the investigation.

1. Obligation to Appear and Testify

As a registered representative or firm under FINRA’s jurisdiction, you are generally required to comply with an OTR request. Failure to appear or provide requested information may result in disciplinary action, including an automatic industry bar.

2. Right to Legal Representation

One of the most critical rights you have is the ability to bring legal counsel. Given the high stakes involved, having an experienced attorney present is essential to protect your rights, ensure you answer questions appropriately, and prevent unintentional self-incrimination.

3. Right to Review Evidence

Before or during an OTR interview, your legal counsel may request access to documents or materials related to the investigation. While FINRA does not always grant full disclosure, an attorney can help you understand the nature of the inquiry and prepare responses accordingly.

4. Right to Remain Silent on Self-Incriminating Questions

While you are required to answer FINRA’s questions honestly, if a question could lead to criminal liability, you may have the right to invoke the Fifth Amendment. However, invoking this right may lead to FINRA taking disciplinary action, so this decision should be made with legal guidance.

How to Prepare for a FINRA OTR Interview

Proper preparation is crucial for a successful OTR interview. Here are key steps to take:

1. Hire an Experienced FINRA Defense Attorney

Perhaps the most important step is securing legal representation from an attorney experienced in FINRA investigations. A lawyer can help you understand the scope of the inquiry, advise you on answering questions, and protect your rights throughout the process.

2. Review Relevant Documents

Before the interview, thoroughly review any documents that may be relevant to the investigation, such as customer account records, emails, firm policies, and prior regulatory filings. Your attorney can help determine which materials are most important to understand.

3. Practice Your Testimony

An attorney can conduct a mock OTR interview to help you prepare for the types of questions FINRA is likely to ask. Practicing your responses can help you remain composed and confident during the actual interview.

4. Be Honest and Concise

During the interview, answer questions truthfully but concisely. Avoid volunteering unnecessary information, speculating, or making assumptions. Every statement should be accurate and to the point.

5. Stay Professional and Composed

FINRA examiners will assess not only what you say but also how you say it. Maintain a professional demeanor, stay calm, and avoid appearing defensive or argumentative.

What Happens After an OTR Interview?

Following the FINRA OTR interview, FINRA will analyze the testimony and evidence collected. Possible outcomes include:

No Further Action – If FINRA determines no violations occurred, the investigation may be closed without any further action.
Additional Requests for Information – FINRA may request additional documents or follow-up interviews.
Formal Disciplinary Action – If violations are found, FINRA may issue fines, suspensions, or industry bans.

In some cases, FINRA may refer the matter to the Securities and Exchange Commission (SEC) or other authorities for further action.

Why You Should Contact Bakhtiari & Harrison

If you have received a FINRA OTR request, do not take it lightly. The best way to protect your career and reputation is to seek experienced legal counsel. Bakhtiari & Harrison focusing on defending securities professionals in regulatory matters, including FINRA OTR interviews and enforcement actions.

Our attorneys have a deep understanding of FINRA’s procedures and know how to craft effective defense strategies. We will guide you through the process, help you prepare, and advocate for your best interests every step of the way.

Don’t face a FINRA OTR interview alone. Contact Bakhtiari & Harrison for a confidential consultation and let our experienced attorneys help protect your future. Call us today or visit our website to schedule an appointment.

Your career is on the line—make sure you have the right legal team by your side.