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 Securities Litigation?

Securities litigation is a specialized area of law that addresses disputes involving financial investments, including cases of fraud, misrepresentation, and breaches of fiduciary duty. It serves as a critical legal mechanism for protecting investors, ensuring market integrity, and holding parties accountable for unlawful or unethical behavior in the securities industry.

Understanding Securities Litigation

Securities litigation involves legal actions that arise from disputes over investments such as stocks, bonds, mutual funds, and other financial instruments. These cases often address issues like:

Fraudulent Activity: Misleading investors or falsifying information about a company’s financial health to manipulate stock prices.
Breach of Fiduciary Duty: Financial advisors or brokers acting against their clients’ best interests for personal gain.
Insider Trading: Trading securities based on non-public, material information in violation of the law.
Market Manipulation: Actions taken to artificially inflate or deflate the price of securities, misleading investors.

These cases can be brought by individual investors, groups of investors (class actions), or regulatory bodies such as the Securities and Exchange Commission (SEC).

Types of Securities Litigation

Securities litigation typically falls into two categories:

Private Securities Litigation
This type involves individual investors or groups pursuing legal action against brokers, financial advisors, or companies for financial misconduct. Common examples include suing for losses due to unauthorized trading, excessive trading (churning), or misrepresentation of investment risks.
Regulatory Enforcement Actions
Agencies like the SEC or FINRA (Financial Industry Regulatory Authority) may initiate litigation to enforce compliance with securities laws. These cases often involve penalties, sanctions, or criminal charges against violators.

The Role of Securities Litigation Attorneys

Securities litigation is complex, requiring an in-depth understanding of financial markets, securities regulations, and litigation procedures. Attorneys specializing in this field help clients navigate these challenges by:

Investigating claims of fraud or misconduct.
Gathering evidence to build a strong case.
Filing lawsuits or representing clients in arbitration proceedings.
Negotiating settlements or pursuing litigation to recover financial losses.

Experienced securities litigation lawyers also ensure their clients understand their rights and the legal options available to them, providing guidance every step of the way.

Why Securities Litigation Matters

Securities litigation plays a vital role in maintaining the integrity of financial markets by:

Protecting Investors: It offers a path for investors to seek justice and recover losses caused by fraud or unethical behavior.
Deterring Misconduct: Holding wrongdoers accountable sends a clear message to others in the industry, promoting ethical behavior.
Ensuring Market Transparency: By exposing fraudulent practices, securities litigation helps ensure that investors can make informed decisions based on accurate information.

FINRA Alternative to Securities Litigation

FINRA arbitration is a dispute resolution mechanism designed for conflicts between investors and securities firms. It serves as an alternative to court litigation, providing a faster, more cost-effective way to handle disputes. Instead of going through lengthy and expensive legal battles, parties involved present their cases to an impartial panel of arbitrators who review the evidence and make a binding decision.

This process is typically invoked in cases involving broker misconduct, unsuitable investment advice, fraud, misrepresentation, or contract violations. Investors and brokers often agree to arbitration through pre-dispute clauses in their account agreements, meaning they have already consented to this method before any conflict arises.

One of the key advantages of FINRA arbitration is its confidentiality, keeping sensitive financial details out of the public eye. Additionally, the process is less formal than traditional court procedures, allowing for quicker resolutions. Although the decision is binding, meaning it cannot be appealed like a court judgment, the process is generally considered fair and impartial.

Both parties have the opportunity to select arbitrators from FINRA’s list, which includes experts in the securities industry. This ensures that knowledgeable professionals are deciding the case. For investors and firms seeking an efficient and private way to resolve disputes, FINRA arbitration provides a reliable path to a resolution.

How Bakhtiari & Harrison Can Help

Bakhtiari & Harrison are experienced securities litigation attorneys serving Los Angeles County and beyond. They specialize in helping clients navigate the complexities of securities disputes, from investigating potential claims to pursuing litigation or arbitration to recover losses. With a deep understanding of securities law and a commitment to personalized client service, they provide the advocacy investors need to protect their financial futures.

If you’re dealing with securities fraud or suspect misconduct, time is of the essence. Contact Bakhtiari & Harrison today for a consultation and let their expertise guide you toward justice and recovery.