The Financial Industry Regulatory Authority (FINRA) oversees the financial and securities industries. Its mission is to enable “investors and firms to participate in the market with confidence by safeguarding its integrity.” When a customer has a negative experience with a brokerage firm or a financial advisor, they may report the issue to FINRA. The customer dispute information then appears on the Central Registration Depository (CRD) and on the publicly available and searchable database known as BrokerCheck. Since FINRA’s goal is to protect members of the public from financial advisors and securities firms acting in bad faith, customer dispute information is not investigated or verified before it appears on the broker’s CRD profile and BrokerCheck. Although many customers have valid claims, misleading, inaccurate, or downright false claims can appear on BrokerCheck and severely damage a securities professional’s reputation. It’s important to recognize that FINRA offers a forum for claimants to resolve disputes with investors or firms. If you’ve recently received a notice from FINRA informing you that another party has filed a complaint against you, it’s natural to feel overwhelmed and confused about what to expect from FINRA’s arbitration process. Your first step should be to enlist the guidance of a highly qualified and experienced securities law attorney who can answer your questions, address your concerns, and prepare you to navigate every step of this process. Let’s take a look at what you can expect from FINRA’s arbitration process and what actions you can take to prepare yourself for the weeks and months ahead.
What Happens When a Party Files a Claim With FINRA
The first step in FINRA’s arbitration process occurs when a party submits three items to FINRA: A Statement of Claim, a Submission Agreement, and a filing fee. Someone wishing to pursue a claim must complete and submit a Statement of Claim, which identifies the details of the dispute, the involved parties, and the amount of economic and non-economic damages the claimant hopes to recover. The claimant will use this document to share their side of the story, and they are encouraged to include supporting documents or forms of evidence to support their claim. In addition to completing and submitting the Statement of Claim, the party must also complete a Submission Agreement that identifies the parties that will be involved in the matter and confirms that FINRA’s arbitration forum will administer and oversee the proceedings. Finally, FINRA requires claimants to submit the required filing fee to ensure that the matter moves forward.
FINRA Receives the Claim and Notifies the Parties
Once a party has taken care of the Statement of Claim, Submission Agreement, and filing fee, FINRA will assign a case number and determine whether any additional information or clarification is needed before the matter moves forward. FINRA will then notify the respondent (typically a member firm or individual financial advisor) of the claim against them. The respondent can expect to receive what FINRA calls a “Claim Notification Letter” in the mail that provides information about the dispute and upcoming arbitration process. For example, the notification letter will provide an overview of the rules of FINRA’s arbitration forum and require the respondent to complete a Submission Agreement confirming that they are aware of the claim made against them and the impending arbitration. The respondent has 45 days to respond to the Claim Notification Letter.
Responding to the Statement of Claim
Although you have 45 days to file your response to the Claim Notification Letter, it’s essential that you start preparing your strategy as soon as possible. Reach out to a dedicated and experienced FINRA arbitration lawyer to discuss the specifics of your situation and identify the most appropriate course of action. Your attorney will help you understand what to expect from the FINRA arbitration hearing and advise you on the steps you need to take to maximize your chances of securing a fair and favorable outcome. As you prepare your response to the Claim Notification Letter, you can outline the defenses you plan on using, as well as the evidence or exhibits you will employ to support your position. Your FINRA arbitration attorney will work with you to identify the most compelling evidence to bolster your claim and case.
Arbitrator Selection, Prehearing Conferences, and Discovery
In order for the matter to proceed, a panel of arbitrators must be selected to administer the case. It’s important to understand that the arbitrators are not FINRA employees—they are independent contractors who have been approved and specially trained to serve in this capacity. A panel of three arbitrators typically handles larger customer claims. Once the arbitrators have been selected, the parties will attend an initial prehearing conference. FINRA usually allows this event to take place via phone or video conference. Your securities law attorney will attend the conference with you, where the parties will discuss procedural issues and schedule the upcoming hearings. Next, the parties will enter the discovery phase of the process, where both sides exchange documents and identify any witnesses they expect to call.
Attending the Arbitration Hearing
On the date of the arbitration hearing, the parties will convene either in person, via video conference, or by telephone. The chairperson will call the hearing to order, the arbitrators will introduce themselves, and all the attendees will introduce themselves. The chairperson will then swear in all of the parties and witnesses who plan on testifying. The claimant’s side will make an opening statement, followed by the respondent’s opening statement. Both sides will then have the opportunity to present evidence, including documents and witness testimony, that supports their position. Additionally, both sides will have the chance to cross-examine the witnesses. Once this phase is completed, the parties will present closing arguments. From there, the arbitrators will deliberate on the matter and issue a decision. If you are struggling with an upcoming FINRA arbitration matter, contact your local securities law firm to get started with a dedicated and trusted FINRA arbitration lawyer who will work hard to help you secure the best possible resolution.
If you are facing an upcoming FINRA arbitration, you likely have questions about what to expect from this process. Give Judex Law, LLC, a call today at (303) 523-4022 to speak with an experienced and friendly securities law attorney.
