The Financial Industry Regulatory Authority (FINRA) primarily focuses on “promoting investor protection and ensuring market integrity in many ways.” This self-regulatory organization has been operating for over 85 years, working to keep the investing public safe from member firms and individual advisors acting in bad faith or otherwise breaching their fiduciary duties. If an investor has an issue with a firm or individual broker, they can take the matter before FINRA’s Dispute Resolution Services (DRS) and seek to resolve it through mediation or arbitration. FINRA’s arbitration process can be daunting and intimidating for investors who are unfamiliar with its highly specific rules and procedures, so it’s recommended that someone facing FINRA arbitration seeks the counsel of an experienced and caring securities law attorney to provide them with the guidance and support they need to navigate the process with greater understanding. As you prepare for an upcoming FINRA arbitration hearing, it’s worth reviewing some of the most frequently asked questions (FAQs) about the rules and procedures so that you can move forward with more clarity and ease. Here are just a few of the most commonly asked questions and information about FINRA arbitration to help you get started.
What is FINRA Arbitration?
According to FINRA, “Arbitration is similar to going to court, but faster, cheaper and less complex than litigation.” In other words, FINRA arbitration allows disputing parties to resolve the issue outside of the traditional court system. Disputes between investors and individual financial advisors or brokerage firms will be resolved by a neutral third party known as an arbitrator (or a panel of three arbitrators, for cases involving larger customer complaints). At the end of the process, the arbitrator or arbitrators determine whether to render an award to the party who filed the arbitration action or claim.
Who Can File a FINRA Arbitration Claim?
Any party who has a dispute related to securities or investment activities may initiate a FINRA arbitration claim. Most FINRA arbitration claims are filed by members of the investing public that are clients of a registered brokerage firm against the firm itself or an individual financial advisor.
What is the First Step of the FINRA Arbitration Process?
The party that wishes to resolve a dispute needs to draft and file a Statement of Claim. This document includes a description of the contested issue, the parties involved in the matter, and the monetary size of the damages the claimant is seeking to recover. The Statement of Claim serves as the claimant’s first chance to present their side of the story. When a claimant files a Statement of Claim, they will need to include supporting documents that substantiate the details of their assertions. It’s worth noting that the claimant will also need to sign and submit a Submission Agreement and pay the required filing fee in order for FINRA to assign a case number and contact number so that the matter may proceed.
How Do I Respond to a Statement of Claim?
When an investor files a claim against a member firm or individual broker, the party named in the claim (the respondent) will be notified by FINRA. They will receive a “Claim Notification Letter” by mail, informing the respondent of the claim made against them and providing them with the information about upcoming hearings and how to contact FINRA with any questions that they may have. The respondent has 45 days to submit an answer to the Claim Notification Letter, in which they may provide the defenses they plan to argue and any evidence they have to support their position. Receiving a Claim Notification Letter can be a disorienting and stressful experience for many individual financial advisors, so reaching out to a trusted and experienced FINRA arbitration lawyer can help you assess the details of your situation and determine the most strategic path forward.
What is the Role of a FINRA Arbitrator?
FINRA arbitrators are neutral third parties that oversee the dispute and decide whether to issue an award to the claimant. It’s important to recognize that arbitrators are not FINRA employees; instead, they work on a case-by-case basis as independent contractors to maintain neutrality. FINRA requires its arbitrators to complete training programs before they are allowed to serve in this capacity. Moreover, these individuals must have sufficient and relevant experience, education, professional licenses, and employment history to qualify for the arbitrator role. Over the years, FINRA arbitrators have come from many different sectors and have included attorneys, accountants, financial professionals, and other members of the public who have undergone the necessary training requirements.
How Long Does FINRA Arbitration Typically Take?
Generally speaking, FINRA arbitration takes approximately 12 to 18 months to conclude. However, this timeline can vary considerably depending on the complexity of the case and scheduling issues. If your case involves investors or parties that are elderly or seriously ill, you may be able to expedite the process by making a formal request.
What Happens Once the FINRA Arbitrators are Selected?
Once the parties have selected a panel of three arbitrators (or one arbitrator, if the case is smaller and less complex), they will attend an initial prehearing conference, which is typically held over video conference. During the prehearing conference, the arbitrators and the parties (and their respective attorneys) will discuss procedural matters, mediation alternatives, and select the hearing dates. Next, the arbitration case enters the discovery phase, where the parties will exchange information and key documents, as well as identify any witnesses they plan on involving in the case. The discovery process is highly regulated, so it’s helpful to work with your FINRA arbitration attorney to navigate this step of the process with greater understanding and clarity.
What Does the FINRA Arbitration Hearing Look Like?
FINRA arbitration hearings can take place in person or via video conference. FINRA has several Codes of Arbitration that all cases must follow, and your trusted and knowledgeable securities law attorney can help you understand these rules and how they affect the course of the hearing. When you partner with a skilled attorney, you can prepare thoroughly for the hearing and move through each step of the arbitration process with greater confidence.
Get Started With a Top FINRA Arbitration Lawyer Today
If you have questions about how to prepare for and navigate through a FINRA arbitration, Judex Law LLC is your go-to guide during this process. Founding attorney Tosh Grebenik has handled more FINRA cases than any other attorney in the country, including over 230 FINRA arbitration awards. To learn more about the FINRA arbitration process, reach out to our Broomfield, Colorado office today by calling (303) 523-4022 to get started with a highly experienced and friendly securities law attorney.