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.

Employment Disputes in the Financial Services Industry

Bakhtiari & Harrison represents registered representatives and registered investment advisors in employment disputes with broker dealers and other financial institutions.

Employment Disputes Often Arise in the Securities Industry

The firm is experienced in employees who have faced wrongful or unfair termination, are entangled in disputes over salary, incentive compensation, or other benefits, and have been victims of unlawful discrimination, harassment, or constructive termination due to a hostile work environment. Employment attorneys play a crucial role in addressing these complex issues, providing expert legal guidance to ensure that employees’ rights are protected and that they receive the compensation and treatment they are legally entitled to.

In the securities industry, where professionals often receive a significant portion of their income in the form of annual bonuses or incentive compensation, the termination of employment before the distribution of year-end bonuses can frequently lead to contentious disputes over owed compensation. Employment attorneys are skilled in navigating these disputes, helping clients to secure the compensation that was expected and often contractually agreed upon. They assess the terms of employment agreements and the circumstances surrounding termination to determine the validity of claims for unpaid bonuses and other forms of compensation.

Moreover, these attorneys assist in negotiations and, if necessary, litigation, to resolve compensation disputes effectively. They ensure that clients are not only compensated for lost income but also for any additional damages caused by unlawful employment practices such as discrimination or harassment. Their expertise extends to advising clients on the best strategies to handle termination and resignation scenarios to safeguard their professional and financial interests.

Employment attorneys are also adept at interpreting and applying laws that protect employees from discriminatory practices and unfair labor practices, ensuring compliance with both federal and state employment statutes. Their intervention is crucial for employees navigating the complexities of employment law, particularly in specialized industries like securities where the structure of compensation and the stakes of employment disputes can be uniquely complicated.

For any employee in the securities industry facing challenges related to termination, employment disputes, compensation disputes, or workplace rights violations, consulting with an experienced employment attorney is essential. These legal professionals provide the necessary support to address and resolve issues effectively, advocate on behalf of their clients, and ensure fair and legal treatment in the workplace.

Registered Representatives with substantial books of business are often recruited and paid up-front loans in the form of promissory notes to induce them to join a new firm. These notes are typically forgiven by the brokerage firm over a period of years. If a broker leaves or is terminated by the firm a dispute may arise over what portion of the broker’s promissory note is forgivable. Forgivable notes are a common sources of employment disputes.

Were you induced to leave your old firm with promises that were never kept? Contrary to what the firms will tell you, false promises to induce you to quit one position for another may be actionable. Damages may include the value of your commissions and other benefits you gave up which can be projected for a number of years as well as the direct expenses resulting from your change in position.

These promises are often accompanied by a loan that is forgivable over time. If you leave before the balance has been paid, you can expect the firm to file an arbitration against you. You will then be transformed from prosecuting your claim as a victim, to defending a claim accusing you of wrongdoing. You must act promptly to protect yourself and your book of business.

Employees of broker dealers cannot be terminated for reasons prohibited by employment agreements, statutes or public policy. Even “at will” employees may have rights if they are members of a protected class, retaliated against, harassed or if their employer violates public policy or statutes designed to protect employees.

The Importance of Selection of Experienced Counsel in Employment Disputes

The retention of an attorney and law firm is an important decision made with great care. Please review our web site and examine our Experience and Credentials. The choice of counsel may be the single most important decision a litigant makes either before or after a dispute arises. Also read more about The Importance of Selection of Counsel. Employment Disputes

Most employment disputes in the securities industry are arbitrated before the Financial Industry Regulatory Authority. FINRA arbitration is a dispute resolution process used to resolve conflicts between investors and securities firms. Administered by the Financial Industry Regulatory Authority (FINRA), this process offers a faster, less formal alternative to court litigation. It involves a neutral panel of arbitrators who review evidence and make binding decisions. Bakhtiari & Harrison has extensive experience resolving employment disputes in this forum around the country.