FINRA Arbitration Process

Arbitration is a method of resolving disputes that serves as an alternative to the standard court process. Instead of having a judge and jury make a decision, parties involved in an arbitration agree to have their dispute settled by an impartial panel of one or three arbitrators. Nearly all disputes between investors, brokers, and brokerage firms are resolved through arbitration, often before a FINRA arbitration panel. Laws regulating arbitration proceedings exist at both the federal and state levels. A key aspect of these laws is that arbitration awards are considered final and binding, with court review being limited. It’s important to note that when choosing arbitration as a way to resolve a dispute, individuals typically forfeit their right to take the matter to court.

Both Investors and Advisors can use the FINRA arbitration process

The FINRA arbitration process begins with the filing of a Statement of Claim, which functions similarly to a civil complaint in court. This document outlines the facts of the case and the desired outcome. Along with the Statement of Claim, you’ll need to submit a Submission Agreement, which signifies your agreement to follow FINRA’s Code of Arbitration and other relevant rules. Working with an experienced FINRA lawyer can assist in the drafting of your Statement of Claim and submission process. 

The financial advisor or brokerage firm against whom you have filed a claim must respond to your Statement of Claim within 45 days of being served. Their response should include their account of the dispute and any defenses they may have. After receiving the response, the parties choose an arbitration panel. For cases involving claims worth over $100,000, FINRA provides each side with a list of 30 potential arbitrators. With the help of an experienced FINRA arbitration lawyer, you can eliminate certain potential arbitrators based on their background or experience and rank the remaining candidates. A FINRA lawyer can provide valuable input in the selection process. FINRA, not the parties, makes the final decision on the arbitration panel by choosing the highest-ranked arbitrators after each side submits their rankings. The number of arbitrators on the panel is determined by the value of the case.

Once the arbitration panel is formed, FINRA schedules an initial prehearing conference. During this conference, the panel establishes deadlines for discovery, briefing, and motions, sets dates for subsequent hearing sessions, and handles any other preliminary issues. During the discovery process all parties involved are charged with providing a list of documents.

The Hearings during a FINRA arbitration

Arbitration hearings resemble civil trials, but the rules of evidence are more relaxed. Both sides are entitled to present opening statements, call witnesses, present evidence, and give closing arguments. The panel has the authority to decide which evidence to admit. All witnesses must give testimony under oath and the proceedings are recorded. After a hearing the award needs to be issued within 30 days. The award should be in writing and signed by a majority of the arbitrators. It must include the following information: the names of the parties and their representatives, a declaration that the arbitrators read the pleadings, a summary of the issues, the requested and awarded damages and relief, details on any other issues resolved, allocation of the forum fees, the number and dates of the hearing sessions, the location of the hearings, and the signatures of the arbitrators.

Why a FINRA attorney can make a difference

Understanding and keeping up with the FINRA arbitration process is not a simple task. Having an attorney during a FINRA arbitration is important for several reasons:

• Knowledge of the Law and FINRA Rules: An attorney who specializes in FINRA arbitration is knowledgeable about the FINRA Code of Arbitration, FINRA rules, and the relevant laws governing the arbitration process. They can use this knowledge to develop a strategy that maximizes your chances of success.

• Experience in Arbitration Proceedings: An attorney with experience in FINRA arbitration proceedings understands how the process works, what evidence is relevant, and what arguments are most likely to be successful. This can give you an advantage during the arbitration hearing.

• Preparation and Representation: An attorney can help you prepare and file your Statement of Claim, draft your submissions, and represent you during the arbitration hearing. They can also advise you on the settlement negotiations and help you evaluate any settlement offers.

• Advocacy and Negotiations: An attorney can serve as your advocate and negotiate on your behalf during the arbitration process. They can present your case in a compelling manner, cross-examine witnesses, and make arguments on your behalf to the arbitration panel.

Having an attorney during FINRA arbitration can increase your chances of success and provide you with the necessary legal support and guidance to navigate the process. If you are an investor or a financial advisor you have rights. Contact us today to set up a consultation.