FINRA Arbitration

The Financial Industry Regulatory Authority (FINRA) arbitration process provides investors with a means for resolving disputes with securities advisors. By going through arbitration, the parties can avoid the waiting period and costs associated with the court system, though parties may still have an attorney with them during the arbitration process to provide legal guidance.

Arbitration is a method of resolving disputes between parties using an independent third party. By going through arbitration, parties can obtain a resolution in their dispute faster and with less cost than by using the traditional court system. However, by using arbitration, the parties forgo the right to bring the case in court. Further, the ability to appeal an arbitration decision is limited to only a very few issues. Click here for a greater overview of the arbitration process.

FINRA is a Congressionally-authorized not-for-profit organization that provides protection for investors by regulating the securities industry. It accomplishes this protection through the enforcement of rules governing brokers and brokerage firms. Though FINRA was authorized by Congress, it is not part of the government. In 2014, FINRA levied $134 million in fines and ordered $32.3 million to be paid in restitution to investors who were harmed.

The process begins when a claimant (like an investor) files a Statement of Claim with FINRA, which can be done by mail or online. The Statement of Claim contains the following information:

1. A description of the dispute;
2. The parties involved; and
3. The amount of money sought.

It is also important to provide any other documents that support the claim. Further, the claimant must submit a Submission Agreement. This document lists the parties in the case, in addition to confirming that FINRA will be the administrator, that the case will end with a hearing, and that the parties agree to abide by the decision of the arbitrator. The claimant must pay appropriate fees to initiate the process.

After the required documents are filed by the claimant, FINRA serves the Statement of Claim on the other parties involved in the dispute (known as the respondents). Additionally, FINRA examines the size of the claim to determine the number of arbitrators that will be needed, as well as the nature of the dispute and the types of securities involved.

Importantly, a claim is ineligible for FINRA arbitration if six years have passed since the occurrence or event that gave rise to the claim. Further, during the arbitration process, no party may bring a suit, legal action, or proceeding against any other party that concerns or that would resolve any matters raised in the arbitration. Finally, class action disputes are not eligible for FINRA arbitration.

While the arbitration process can be less complicated than using the traditional court system, it is still advisable to speak with an experienced attorney about a securities claim. Before you initiate a FINRA arbitration claim, contact the Silver Law Group. We can provide answers to any questions that you may have. Scott Silver recently spoke at the Florida Justice Association’s annual convention on the ABC’s of FINRA Arbitration. Please click here for Scott’s PowerPoint presentation.