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 an AWC? How to Process The Correct Response

The financial industry is heavily regulated to ensure fairness, transparency, and integrity. For professionals in the securities sector, compliance with regulatory rules is paramount. If you have encountered the term AWC (Acceptance, Waiver, and Consent) in the context of a Financial Industry Regulatory Authority (FINRA) investigation, it is crucial to understand what it means and its implications.

Understanding an AWC

An AWC is a settlement agreement between FINRA and a securities industry professional or firm. It allows the respondent to resolve allegations of rule violations without admitting or denying the findings, while still accepting the consequences imposed by FINRA. This process provides an alternative to a formal disciplinary proceeding, which could be lengthier and more costly.

Why Would Someone Receive an AWC?

An Acceptance, Waiver, and Consent is typically offered when FINRA has completed an investigation and believes there is sufficient evidence to pursue disciplinary action. Common reasons an AWC may be issued include:

Customer Complaints – If a broker or firm is accused of misconduct, such as misrepresentation or unauthorized trading, FINRA may investigate and propose an Acceptance, Waiver, and Consent settlement.
Failure to Supervise – If a firm fails to implement proper oversight of its representatives, it may face a settlement for supervisory lapses.
Unsuitable Recommendations – Recommending investments that are inappropriate for a client’s risk profile and financial situation can lead to regulatory scrutiny and a potential Acceptance, Waiver, and Consent.
Market Manipulation or Fraud – Allegations of insider trading, excessive trading (churning), or other manipulative practices may result in FINRA offering an Acceptance, Waiver, and Consent.
Regulatory Violations – Failing to comply with FINRA rules, recordkeeping requirements, or reporting obligations may trigger disciplinary action resolved through an Acceptance, Waiver, and Consent.

The Serious Nature of an AWC

While an AWC may seem like an efficient way to resolve a regulatory issue, it is a serious matter with long-term consequences. Signing an AWC means:

Accepting FINRA’s sanctions, which could include fines, suspensions, or permanent bans from the industry.
Waiving the right to appeal or contest the findings in a formal hearing.
Having the settlement publicly disclosed on FINRA’s BrokerCheck, potentially impacting future employment and professional reputation.

What Are Your Rights?

Before agreeing to an Acceptance, Waiver, and Consent, individuals and firms have rights that should be carefully considered:

Right to Legal Representation – You are not required to accept an AWC without seeking legal advice. Consulting an attorney experienced in FINRA matters can help you assess whether settlement is the best option or if challenging the allegations is more appropriate.
Right to Negotiate – An AWC is not necessarily a take-it-or-leave-it offer. Legal counsel can negotiate the terms, including reducing penalties or adjusting the language to minimize reputational harm.
Right to Reject the AWC – If you believe the allegations are unfounded or the penalties are too severe, you can reject the AWC and request a formal hearing before FINRA’s Office of Hearing Officers.

How to Respond to an AWC Offer

If you receive an AWC from FINRA, it is critical to approach the situation strategically. Here are essential steps to take:

Consult experienced FINRA counsel – The decision to accept or contest an AWC should not be made lightly. An attorney with expertise in FINRA enforcement actions can review the facts, advise on potential consequences, and negotiate on your behalf.
Analyze the Allegations – Carefully review FINRA’s claims and the evidence supporting them. Understanding the strength of the case against you will help determine whether to settle or challenge the findings.
Assess the Long-Term Impact – Consider the professional and financial consequences of an AWC, including how it may affect future employment, licensing, and business relationships.
Explore Alternatives – If the penalties are severe, your attorney may negotiate a reduced sanction or argue for a less damaging resolution.
Make an Informed Decision – Weigh the risks and benefits of signing an AWC versus proceeding to a hearing. While an AWC offers certainty and efficiency, contesting the allegations may be worth the effort if the case against you is weak.

Why You Should Contact Bakhtiari & Harrison

If you have received an Acceptance, Waiver, and Consent from FINRA, you need experienced legal counsel to guide you through the process. Bakhtiari & Harrison specializes in representing securities professionals in regulatory matters, including FINRA investigations and enforcement actions.

Our attorneys understand FINRA’s procedures and how to craft effective defense strategies. We will evaluate your case, explore all available options, and work to protect your career and reputation.

Contact Us Today

Don’t navigate the AWC process alone. Contact Bakhtiari & Harrison for a confidential consultation and let our experienced attorneys help protect your future. Call us today or visit our website to schedule an appointment.

Your career is on the line—make sure you have the right legal team by your side.