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.

RIA Customer Agreements: Why an Experienced Securities Attorney is Essential

In the world of investment advisory, the relationships between Registered Investment Advisors (RIAs) and their clients are governed by a series of complex and highly detailed agreements. These documents outline everything from investment objectives to risk tolerance and time horizons, serving as the foundation for the fiduciary relationship between advisors and their clients. Ensuring these agreements are meticulously drafted and thoroughly reviewed is crucial to maintaining compliance, protecting client interests, and mitigating legal risks. This is where the expertise of an experienced securities attorney becomes indispensable.

The Role of Customer Agreements in RIA Operations

Customer agreements are the backbone of the advisory relationship. They set the terms and conditions under which an RIA provides services, defining the scope of authority, investment strategies, fee structures, and the responsibilities of both parties. Given their critical importance, these documents must be precise, clear, and comprehensive to avoid misunderstandings and potential disputes.

Key Elements of RIA Customer Agreements

Investment Objectives and Risk Tolerance: Clearly articulating a client’s investment objectives and risk tolerance is essential. These elements dictate the advisory strategies and the types of investments that are appropriate for the client. An experienced securities attorney ensures that these aspects are accurately captured and legally sound, reflecting a mutual understanding between the advisor and the client.
Time Horizon: The time horizon for achieving investment goals varies significantly among clients. Whether it’s short-term capital growth or long-term retirement planning, these details must be explicitly stated in the agreement. An attorney can help draft these provisions to ensure they are aligned with both regulatory requirements and client expectations.
Fee Structures: Transparent disclosure of fees, including management fees, performance fees, and any other costs associated with the advisory services, is crucial. A securities attorney can help ensure that the fee structures are not only competitive and fair but also comply with applicable laws and regulations.
Regulatory Compliance: RIAs operate under strict regulatory frameworks imposed by bodies such as the SEC and state regulators. Customer agreements must adhere to these regulations to avoid penalties and ensure continued operations. An experienced attorney stays abreast of the latest regulatory changes and ensures that all documents meet current standards.

The Importance of Legal Expertise in Drafting and Reviewing Customer Agreements

Mitigating Legal Risks

One of the primary reasons for involving a securities attorney in the review of RIA customer agreements is to mitigate legal risks. Poorly drafted agreements can lead to disputes, regulatory scrutiny, and costly litigation. An attorney’s expertise helps identify and rectify potential issues before they escalate.

Ensuring Clarity and Precision

Legal documents can often be dense and difficult to understand. An experienced attorney ensures that customer agreements are written in clear, precise language, reducing the likelihood of misunderstandings. They also ensure that all necessary disclosures are made in a way that is easily comprehensible to clients.

Tailoring Agreements to Specific Client Needs

Every client is unique, and their agreements should reflect this individuality. A securities attorney can help tailor customer agreements to address specific client circumstances, ensuring that the RIA’s services are aligned with the client’s goals and needs.

The Role of a Securities Attorney in Regulatory Compliance

Compliance with regulatory requirements is a critical aspect of an RIA’s operations. Failure to comply can result in severe consequences, including fines, sanctions, and damage to the firm’s reputation. A securities attorney helps ensure that all customer agreements meet regulatory standards, providing peace of mind to both the RIA and its clients.

Keeping Up with Regulatory Changes

Regulatory environments are dynamic, with frequent changes and updates. An experienced securities attorney continuously monitors these changes and updates the necessary agreements and documents accordingly. This proactive approach helps RIAs stay ahead of regulatory SEC or state requirements and avoid potential compliance issues.

Conducting Regular Compliance Reviews

Regular compliance reviews are essential to maintaining the integrity of customer agreements. A securities attorney conducts thorough reviews of existing agreements, identifying areas that may need updating or improvement. This ongoing process helps maintain compliance and ensures that the RIA’s operations are always aligned with current legal standards.

Bakhtiari & Harrison: Your Trusted Partner in Securities Law

At Bakhtiari & Harrison, we understand the complexities and nuances of the investment advisory industry. Our team of experienced securities attorneys is dedicated to providing comprehensive legal support to RIAs, ensuring that all customer agreements and related documents are meticulously reviewed and compliant with regulatory standards.

Expertise in RIA Operations

Our attorneys have extensive experience in dealing with the specific needs of Registered Investment Advisors. We understand the critical importance of accurately capturing investment objectives, risk tolerance, time horizons, and fee structures in customer agreements. Our goal is to ensure that these documents are not only legally sound but also aligned with the best interests of both the advisor and the client.

Commitment to Regulatory Compliance

Staying compliant with regulatory requirements is essential for the success and longevity of any RIA. At Bakhtiari & Harrison, we are committed to helping our clients navigate the complex regulatory landscape. Our attorneys keep abreast of the latest developments in securities law, ensuring that all customer agreements are up-to-date and fully compliant.

The importance of having an experienced securities attorney review your RIA customer agreements cannot be overstated. These documents are foundational to the advisory relationship, and their accuracy and compliance are paramount to the success of your practice. By partnering with Bakhtiari & Harrison, you gain access to a team of dedicated professionals who understand the intricacies of the investment advisory industry and are committed to protecting your interests.

For more information about how Bakhtiari & Harrison can assist with your customer agreements and ensure regulatory compliance contact us. Our experienced securities attorneys are here to provide their guidance you need to navigate the complexities of securities law and achieve your business objectives. Contact Bakhtiari & Harrison today to learn more about how we can help secure the future of your investment advisory practice.