GOT A BEEF WITH YOUR BROKER? You’ll have to keep waiting for your day in court. In April, state securities regulators and members of Congress urged the SEC to end Wall Street’s practice of forcing customers to resolve disputes through nonjudicial binding arbitration rather than by a lawsuit. Riling them up was a ruling in March to let Charles Schwab extend the longtime ban on individual court actions to also forbid customers from joining class-action suits. Critics say Schwab’s move, likely to become industry practice if it stands, would unfairly shield brokerages from paying damages if they were liable for small-scale losses among a large number of customers. While some SEC members are sympathetic, Commissioner Elisse Walter said in May they won’t address the issue this year, Reuters reports. In any case, protect yourself by saving records and documenting conversations with your broker, says Los Angeles securities lawyer Ryan Bakhtiari. Verify all fees, and vet your broker carefully using brokercheck.finra.org.
FINRA arbitration is a dispute resolution process administered by the Financial Industry Regulatory Authority (FINRA). It provides a forum for resolving monetary disputes between investors and securities firms or brokers without going to court. The process is generally faster and less formal than traditional litigation, and decisions are made by a panel of arbitrators who are knowledgeable in securities law and industry practices. Arbitration through FINRA is binding, meaning the decision is final and enforceable in court. This process is commonly used for disputes involving investment losses, unsuitable recommendations, or misrepresentation. Investors must agree to arbitration in their brokerage agreements, often as a condition of opening an account. While arbitration can be a more efficient way to resolve disputes, it also has limitations, such as limited appeal options and potentially high costs. Despite these challenges, FINRA arbitration remains a crucial mechanism for investor protection and dispute resolution in the securities industry.
Bakhtiari & Harrison is an “AV” rated law firm, focused on the worldwide representation of clients in complex arbitration, litigation, and related legal services in matters involving the securities industry. The firm’s partners have extensive experience in securities, employment and regulatory matters. Our focus is on delivering strategic and creative client-centric solutions.