Why FINRA arbitration for investment fraud / stockbroker claims?
Virtually all stockbroker claims are decided in arbitration rather than court.. That is because brokerage firms require their customers to sign agreements saying that the customer waives the right to go to court, and agrees instead to arbitrate all disputes. Stockbroker arbitrations are filed with FINRA, the Financial Industry Regulatory Authority, formerly known as the NASD.
How does FINRA arbitration differ from court?
In arbitration, arbitrators, rather than a judge or jury, decide your case. Most FINRA arbitrations involve three arbitrators, two of whom are considered “public,” with no ties to the securities industry, and one of whom is “non-public,” and either is or was employed by the industry, or has some other significant connection. The arbitrators are usually familiar with the issues presented in an arbitration and are sworn to decide cases without bias. The arbitrators hear the testimony of witnesses, review the account statements and other important papers that the parties submit, and listen to the arguments of attorneys much like a court or jury would — only the case is tried in a somewhat less formal conference room setting rather than a courtroom. After the hearing is over, the arbitrators issue a decision, which is binding on the parties. If you win your case and the brokerage firm does not pay your award, they are subject to suspension from the FINRA until the award is paid.
Arbitrations are usually less expensive and proceed more quickly than court cases. Court cases involve discovery depositions, which are expensive due to travel and court reporter costs. FINRA arbitrations prohibit depositions except in rare circumstances. Typically, it takes about ten to 14 months for an FINRA arbitration to get to trial from the time that it is filed. In most courts, cases take longer to get to trial.
Arbitration decisions are final and binding. In fact, as a rule they are more final than court decisions, because the grounds for appeal in arbitration is extremely limited and challenges to arbitration awards very rarely succeed.
How Does FINRA arbitration work?
To start an arbitration, the investor (known as the claimant), usually through a lawyer, files a "statement of claim" and other papers with FINRA. FINRA then serves the claim on the stock brokers or financial advisors (known as the respondents) that are being sued. Respondents then file an answer to the claim, which usually denies responsibility for the conduct and losses described in the claim.
The attorneys receive a list of 15 potential arbitrators. Each side ranks and strikes the names on the list, based upon their knowledge of and experience with the arbitrators. From the ranked lists prepared by each side, FINRA selects a panel of three arbitrators. Once the panel is selected, FINRA schedules an Initial Prehearing Conference (IPHC). The IPHC is a telephone conference between the arbitrators and the attorneys for the parties. At the IPHC, the parties agree upon the length and dates for the hearing that will decide the claims.
To prepare for the hearing that will decide the case, both sides participate in discovery of the evidence. The parties exchange pertinent documents and information that is needed to present, argue and decide the case. Each side provides the others with relevant records that may become evidence at the hearing. .
Twenty days before the hearing begins, each side is required to disclose to the others the identity of all witnesses, and copies of all of the exhibits they intend to offer at the hearing that have not already been exchanged.
At Banks Law, we spend a great deal of time with our clients preparing the case. We do not use forms or templates. We do not have a high volume practice, and every one of our claims is individually drafted with input from and review by our clients. We stay in contact with you throughout the process, and keep you updated on all developments. Prior to the hearing, we meet with you and review your case and the entire hearing process to make sure we are all fully prepared to present your case fairly and clearly to the arbitrators.
The arbitration hearing takes place in a conference room in a hotel or office suite, or at the FINRA offices, usually in the city where you lived when the investment problems arose. . Hearings begin with opening statements by each side. We go first, presenting the case, calling witnesses on your behalf, and introducing exhibits. After we have finished presenting our case, the respondent presents its case. Then the lawyers each give closing arguments. The arbitration panel issues a written award, usually within a week or two. Respondents have 30 days to pay any award made against them.
Will my FINRA case definitely go to a hearing?
Sometime before the hearing, the respondents make offers to settle "out of court" in virtually all of our cases. Our clients choose to accept settlement offers in fifty to seventy percent of our cases. Those that cannot be settled are decided by the arbitrators after a hearing.
The Banks Law Office will assist you in deciding how to respond to settlement offers, and we will certainly tell you if we feel strongly one way or the other. But, the decision is ultimately yours to make. We assume that all cases will have to be tried, and will not accept your case unless we are confident that we can win at the hearing.
What will all this cost?
At Banks Law, we accept many of our cases on a contingent fee basis, which means that you do not have to pay attorney fees unless we get a recovery for you. There are out of pocket expenses, including FINRA filing fees, which we will discuss with you before we accept your case.
Other Questions?
Use our Contact Form or Free Evaluation Form or call 503-222-7475. We usually respond the same business day.