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 Securities Attorney? 4 Reasons Why You Might Need Assistance

Securities law is a complex and highly regulated area that governs financial markets, protecting both investors and businesses. Navigating the maze of regulations, compliance requirements, and legal pitfalls can be overwhelming for companies and individuals alike. This is where a securities attorney comes into play. In this blog, we will look at what a securities attorney is and does for prospective clients. We will discuss their role and why their skills are important for businesses and investors in finance.

The Role of a Securities Attorney

A securities lawyer who focuses on laws about buying, selling, and issuing securities. Securities include stocks, bonds, and other financial instruments that companies use to raise capital. Securities lawyers provide legal guidance to businesses, investors, and financial professionals, ensuring that their activities comply with federal and state securities laws.

Securities law is primarily governed by two major federal statutes: the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws, along with regulations set forth by the Securities and Exchange Commission (SEC) and other bodies, dictate the rules for public offerings, disclosures, trading practices, and market activities. A securities attorney’s role is to help clients understand these regulations, mitigate risks, and navigate legal complexities.

Key Responsibilities of a Securities Attorney

A securities professional has many duties. These duties depend on whether they work with companies, financial professionals, or individual investors. Here are some of the key responsibilities of a securities lawyer:

Assisting with Public Offerings
When a company decides to go public and sell stock through an Initial Public Offering (IPO), it must follow strict rules from the SEC. Securities attorneys play a critical role in preparing registration statements, prospectuses, and other required filings. They ensure that companies disclose all necessary information about their business, financial condition, and risks to investors.
Compliance and Regulatory Advice
A key role of a securities attorney is to advise companies and financial institutions on following securities laws, SEC and FINRA rules, policy and procedure. This can include helping businesses adhere to rules regarding insider trading, corporate governance, reporting obligations, and disclosure requirements. Ensuring compliance helps avoid costly penalties and legal disputes that can arise from violations of securities regulations.
Drafting and Reviewing Contracts
Securities lawyers often draft and review complex contracts related to mergers and acquisitions (M&A), financing agreements, and private placements. These contracts involve the sale or transfer of securities and must be structured carefully to avoid legal pitfalls. Securities attorneys work to ensure that all transactions are conducted in accordance with the law and protect their clients’ interests.
Handling Securities Litigation
If a company, broker, or investor is accused of fraud or insider trading, a securities attorney can help. They may represent them in court for violations of securities law. Securities fraud claims often arise when companies fail to disclose material information, provide misleading statements, or engage in deceptive practices. Counsel will defend their client against these allegations and work to achieve the best possible outcome in court or through arbitration.
Advising on Mergers and Acquisitions (M&A)
Securities professionals are often involved in M&A transactions, where one company purchases or merges with another. These transactions involve the transfer of securities, and the attorney ensures that the transaction complies with applicable securities laws. They also assist with due diligence, helping companies assess the financial and legal risks before entering into a deal.
Private Placements and Venture Capital
When companies want to raise money through private placements or venture capital, they face different rules than public offerings. Securities attorneys help set up these deals to follow exemptions in the Securities Act. This ensures that companies do not accidentally break securities laws while raising money from private investors.

Why You May Need Trusted Securities Counsel

If you are an entrepreneur starting a new business, you may need trusted counsel. If you are a company planning to go public, a securities attorney can help you. If you are an investor looking to protect your interests, you might also need a securities attorney. Here are some reasons why seeking legal counsel from a securities attorney can be crucial:

Preventing Legal Violations: Securities laws are stringent, and even an unintentional violation can lead to fines, penalties, or lawsuits. A securities attorney can help businesses and individuals avoid costly mistakes by ensuring compliance with all applicable regulations.
Mitigating Risks: When a company enters into a securities transaction or an investor is dealing with potential fraud, the stakes are high. A securities attorney helps mitigate the risks associated with these transactions by providing strategic legal advice and protecting clients’ rights.
Resolving Disputes: If a dispute arises between investors and companies, such as in cases of securities fraud or breach of fiduciary duty, a securities attorney can mediate or litigate the matter to ensure a fair resolution.
Navigating Complex Transactions: Large financial transactions, such as mergers, acquisitions, and IPOs, involve multiple layers of legal and regulatory complexity. Securities attorneys have the expertise to handle these intricate deals and guide their clients through every stage.

When Should You Contact a Securities Attorney?

You should contact a securities attorney whenever you are dealing with complex financial transactions involving securities, such as:

Preparing for an IPO or a public offering.
Raising funds through private placements or venture capital.
Investigating or defending against accusations of securities fraud.
Engaging in mergers or acquisitions that involve stock transfers.
Navigating regulatory changes in the securities industry.

Why Bakhtiari & Harrison?

If you’re involved in the financial markets or facing a securities-related issue, a securities attorney can provide the guidance you need. At Bakhtiari & Harrison, we help you understand your legal duties. We also protect your interests in securities law matters. Contact us today to discuss your situation and explore how we can assist you with compliance, litigation, or transactions. Let us help you navigate the complexities of securities law with confidence.