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FINRA Arbitration – An Overview

Why FINRA Arbitration May Be Required

In most instances, investors must utilize FINRA arbitration for securities disputes with brokerage firms and/or their financial advisors. Contractual provisions require most disputes be resolved through the FINRA arbitration process, instead of a traditional court proceeding.

Moulton & Arney: FINRA Arbitration Experience

Investors are often compelled to arbitrate their dispute under the terms of the contract with the brokerage or investment firm. When it comes to recovering investmentlosses, experience and past success play a key role. Over the years, we have represented thousands of investors, assisting and advising them throughout the dispute resolution process. Our experienceincludes FINRA arbitrations, proceedings in state or federal court and, when appropriate, mediations. Additionally, we have extensive experience with various arbitral institutions outside of FINRA, and their unique procedural practices.

The FINRA Arbitration Process

Typically, four (4) separate and distinct phases are associated with the initiation and prosecution of the FINRA arbitration process.

1. The first phase of the FINRA arbitration process begins when an aggrieved investor files a “ Statement of Claim ” with the offices of FINRA Dispute Resolution. TheStatement of Claim contains the customer’s version of the relevant facts related to the securities dispute, as well as a request for relief (which typically includes a request for an award of money damages, but may include other remedies as well).

Once the Statement of Claim has been filed, it is served by FINRA on the brokerage firm and/or financial advisors involved in the dispute. The firm and/or the advisors are then required to file their “Statement of Answer,” containing their version of the relevant facts and defenses applicable to the securities dispute.

2. The second phase of the FINRA arbitration process encompasses the selection of individuals to serve as arbitrators, who will ultimately render a final decision settling the parties’ dispute. Depending on the amount of damages involved in the securities dispute, the number of arbitrators can range from one (1) to three (3). All parties in a FINRA arbitration proceeding are involved in the review process and the final selection of the arbitrators who will decide their securities dispute.

3. The third phase of the FINRA arbitration process involves the exchange of documents and information between the parties regardingthe facts and circumstances associated with the securities dispute.  This process is known as “discovery.”  The parties may also file various pretrial motions requesting the arbitrators to resolve procedural disputes, although the number of motions typically filed in arbitration is much less than in traditional litigation.

4. The fourth and final phase of the FINRA arbitration process is the actual hearing of the securities dispute before thearbitration panel. During an arbitration hearing, all parties involved in the securities dispute are entitled to present witnesses and documents in support of their respective positions. In many respects, the hearing portion of a FINRA arbitration process is similar to a traditional court proceeding (although the process is relatively informal compared to a trial before a judge).

Litigation Experience a Key in FINRA Arbitration

At the conclusion of the hearing in a FINRA arbitration, the arbitrators meet and determine the outcome of the case. Within a few weeks, the arbitrators’ decision is issued in a written award.

The majority of FINRA arbitration awards do not offer an explanation or rationale for the arbitrators’ final decision. Rather, the FINRA arbitration award simply indicates which party has prevailed and the amount of damages or other relief, if any, that the customer is entitled to receive. If a FINRA arbitration award determines a brokerage firm or financial advisor has to pay damages to a customer, the award generally must be paid within 30 days. If payment does not occur within the required time, the brokerage firm or financial advisor can be expelled or suspended from the securities industry.  An award can also be filed with a court and given the same effect as a court judgment.

FINRA arbitration awards are final and binding on the parties. Only in extremely rare instances will a FINRA arbitration award be successfully challenged in a federal or state court proceeding.

Representation During FINRA Arbitration

During arbitration, the attorneys at Moulton &Arney, LLP will handle all aspects of your claims, including, but not limited to:

  • Review of the documents relevant to your claims
  • Identification of additional information and documents to seek in discovery
  • Helping you request documents from your brokerage firm before a claim is filed
  • Drafting the Statement of Claim
  • Hiring any expert witnesses required to support your claims
  • Appearing before the arbitrators to represent you and present your case
  • Determining when mediation or other settlement strategies are appropriate
  • Post-award strategies and collection

Contact Moulton & Arney: FINRA Arbitration Securities Attorneys

The investment and securities fraud attorneys at Moulton & Arney, LLP have extensive experience representing individual investors in securities arbitration and litigation. Cindy Moulton and Lance Arney have successfully represented thousands of clients in securities and investment fraud cases, with combined claims of hundreds of millions of dollars.

If you have suffered an investment loss, you may be entitled to recover all or part of your investment.  To find out more about your potential claims against your broker/financial advisor, investment firm, or securities firm, please contact an experienced investment fraud attorney.