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 / Investment Advisor Representation

Bakhtiari & Harrison provides legal services to Registered Investment Advisors (RIAs) and their associated persons. Our firm offers expertise and legal guidance and support throughout the various phases of investment advisor operations. We have extensive experience providing comprehensive counseling to RIAs, ensuring they navigate the complex landscape of investment advisory services with confidence and compliance.

At Bakhtiari & Harrison, we understand the critical importance of compliance, business management, and risk mitigation for Registered Investment Advisors. Our services are meticulously designed to assist RIAs during the initial formation stages, ensuring all regulatory and registration requirements are met. The law firm provides ongoing support for compliance matters, helping advisors maintain adherence to industry standards and regulatory expectations. This support includes developing and maintaining a robust compliance program tailored to the unique needs of each RIA, ensuring all securities regulations are meticulously followed.

RIA and Investment Advisor Formation and Compliance

Starting a new advisory firm involves navigating a myriad of regulatory requirements and business considerations. At Bakhtiari & Harrison, we guide RIAs and advisory firms through the intricate process of formation, ensuring that every legal and regulatory aspect is meticulously addressed. Our services include:

Entity Formation: Assisting with the creation of the business entity, whether it be a corporation, partnership, or limited liability company, tailored to the specific needs of the RIA and advisory firms.
Registration Requirements: Helping RIAs and advisory firms register with the appropriate regulatory bodies, including the Securities and Exchange Commission (SEC) or state securities regulators. This involves preparing and filing Form ADV and other necessary documentation to meet the requirements set forth by the Securities and Exchange Commission.
Compliance Programs: Developing comprehensive compliance programs that include written policies and procedures designed to prevent violations of securities laws and regulations. We ensure that RIAs and advisory firms have robust compliance frameworks in place. Our team specializes in creating and implementing effective compliance programs that address all regulatory requirements and industry standards. Adhering to securities regulations and the guidelines set by the Securities and Exchange Commission is a key component of these programs.
Ongoing Compliance Support: Providing continuous support to ensure that RIAs and advisory firms remain compliant with evolving regulatory requirements. This includes conducting regular compliance reviews and audits to identify and address potential issues before they become significant problems. Part of our ongoing support is ensuring that the compliance program evolves with regulatory changes and business growth, always staying in line with securities regulations and the expectations of the Securities and Exchange Commission.

RIA and Investment Advisor Business Management and Risk Mitigation

Effective business management and risk mitigation are essential for the success of any RIA. Bakhtiari & Harrison offers strategic advice and practical solutions to help RIAs and advisory firms manage their operations effectively and mitigate risks. Our services include:

Business Strategy and Planning: Assisting RIAs and advisory firms in developing and implementing strategic business plans that align with their long-term goals. This includes advising on business structure, growth strategies, and market positioning.
Risk Management: Identifying potential risks and developing strategies to mitigate them. This includes reviewing and advising on insurance coverage, cybersecurity measures, and internal controls. We integrate these strategies into the compliance program to ensure a comprehensive approach to risk management, while also ensuring adherence to securities regulations and the guidelines of the Securities and Exchange Commission.
Client Agreements: Drafting and reviewing client agreements to ensure they are clear, compliant, and protect the interests of the RIA and advisory firms. This includes investment advisory agreements, fee schedules, and disclosure documents.
Dispute Resolution: Representing RIAs and advisory firms in resolving disputes with clients, employees, or third parties. Our goal is to achieve favorable outcomes while minimizing disruption to the business.

RIA and Investment Advisor Employment Issues

Managing employment issues is a critical aspect of running an RIA. Bakhtiari & Harrison offers strategic advice on employment contracts, dispute resolution, and transitional strategies for investment advisors looking to grow or modify their business structures. Our services include:

Employment Contracts: Drafting and reviewing employment contracts to ensure they are legally sound and protect the interests of the RIA and advisory firms. This includes non-compete agreements, confidentiality agreements, and compensation arrangements.
Dispute Resolution: Advising on the resolution of employment disputes, whether through negotiation, mediation, arbitration, or litigation. We strive to resolve disputes efficiently and effectively, minimizing the impact on the business.
Transition Strategies: Assisting RIAs and advisory firms with the transition of employees during mergers, acquisitions, or other business changes. This includes advising on severance agreements, retention plans, and employee integration strategies.

RIA and Investment Advisor Regulatory Challenges

Navigating the complex regulatory landscape is a significant challenge for RIAs. Bakhtiari & Harrison provides expert guidance on regulatory matters to ensure that RIAs and advisory firms remain compliant with all applicable laws and regulations. Our services include:

Regulatory Filings: Assisting with the preparation and filing of regulatory documents, including Form ADV, Form U4/U5, and other required filings. We ensure that all documents comply with the latest securities regulations and the standards set by the Securities and Exchange Commission.
Regulatory Examinations: Representing RIAs and advisory firms during regulatory examinations and audits. We help prepare for examinations, respond to regulatory inquiries, and address any deficiencies identified, ensuring compliance with securities regulations and the requirements of the Securities and Exchange Commission.
Regulatory Investigations and Enforcement Actions: Defending RIAs and advisory firms in regulatory investigations and enforcement actions. Our goal is to protect the interests of the RIA and achieve favorable outcomes in regulatory matters, always with a strong understanding of securities regulations. Whether dealing with an enforcement action related to compliance issues or other regulatory breaches, our team is prepared to offer robust defense strategies. We recognize that enforcement actions can significantly impact a firm’s reputation and operations, and we work diligently to mitigate these effects. Our team is well-versed in handling cases involving the Securities and Exchange Commission.

RIA and Registered Investment Advisor Transition Between Firms

Transitioning between firms can be a complex process for registered persons. Bakhtiari & Harrison provides comprehensive support to ensure smooth transitions while protecting the interests of the RIA and the individual advisor. Our services include:

Transition Planning: Developing detailed transition plans that address the legal, regulatory, and business aspects of the move. This includes advising on client communication, regulatory filings, and contractual obligations.
Negotiating Transition Agreements: Negotiating transition agreements that protect the interests of the RIA and the individual advisor. This includes addressing non-compete clauses, garden leave provisions, and other contractual terms.
Regulatory Filings: Assisting with the preparation and filing of regulatory documents required for the transition, including Form U4/U5.
Dispute Resolution: Resolving disputes that may arise during the transition process, whether with the former employer, clients, or regulatory bodies.

RIA and Investment Advisor Customer and Industry Disputes

Customer disputes and industry disputes can pose significant challenges for RIAs. Bakhtiari & Harrison provides robust representation to protect the interests of RIAs and advisory firms in these matters. Our services include:

Customer Disputes: Representing RIAs and advisory firms in resolving disputes with clients, whether through negotiation, mediation, arbitration, or litigation. We aim to achieve favorable outcomes while preserving client relationships.
Industry Disputes: Representing RIAs and advisory firms in disputes with other industry participants, such as broker-dealers, custodians, and service providers. We provide strategic advice and representation to protect the interests of the RIA and advisory firms.
Disciplinary Actions and Enforcement Actions: Defending RIAs and advisory firms in disciplinary actions and enforcement actions brought by regulatory bodies. Our goal is to protect the RIA’s reputation and achieve favorable outcomes in these matters. Understanding the potential ramifications of an enforcement action, we offer comprehensive support to ensure the best possible defense. Our expertise includes handling enforcement actions initiated by the Securities and Exchange Commission, ensuring our clients are well-defended against any allegations.

Bakhtiari & Harrison Provides Legal Services to RIAs and Investment Advisors

Bakhtiari & Harrison is dedicated to providing comprehensive legal support to Registered Investment Advisors and advisory firms. Our expertise in compliance, business management, employment issues, regulatory challenges, and dispute resolution ensures that RIAs and advisory firms can navigate the complexities of the investment advisory industry with confidence. Whether you are starting a new advisory firm, managing transitions, or facing complex regulatory challenges, Bakhtiari & Harrison is equipped to deliver the legal solutions that

Registered Investment Advisors need to succeed in a competitive financial landscape. A well-designed compliance program is a cornerstone of this success, providing the framework for adherence to regulatory standards and effective risk management. Understanding and adhering to securities regulations and the directives of the Securities and Exchange Commission is fundamental to our approach in all aspects of our service. Our team of professionals is dedicated to ensuring that your firm operates within the boundaries of all applicable laws and regulations.

For more information concerning areas of routine representation, please contact Bakhtiari & Harrison to schedule a consultation. Our experienced attorneys and professionals are ready to assist you with all your legal needs, ensuring your compliance program and overall operations are robust and efficient.

We are committed to helping you easily navigate securities regulations and providing ongoing support from our compliance professionals. If your firm is ever subject to an enforcement action, our expertise will provide you with the necessary defense to protect your interests, especially in cases involving the Securities and Exchange Commission.