Introduction
When disputes arise between investors and brokerage firms, they are usually resolved through arbitration. The Financial Industry Regulatory Authority (FINRA) offers a streamlined and cost-effective dispute resolution forum for resolving disputes in the securities industry. In this blog post, we’ll take a deep dive into FINRA arbitration, its key features, benefits, and what you should know if you find yourself involved in a securities-related dispute.
Understanding FINRA Arbitration
What is FINRA?
The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization authorized by the United States Congress to oversee and regulate the securities industry. One of FINRA’s essential functions is to provide a forum for resolving disputes between investors, brokerage firms, and individual brokers.
Arbitration vs. Lawsuits: The Key Differences
Unlike traditional litigation, where disputes are resolved through the court system, FINRA arbitration is a private, alternative dispute resolution process. There are several key differences:
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- Speed and Efficiency: FINRA arbitration typically resolves disputes more quickly than litigation, which can drag on for years. Arbitration cases often conclude within 12-18 months, allowing parties to move on with their lives and investments more quickly.
- Cost-Effective: Litigation can be expensive due to legal fees, court costs, and other expenses. In contrast, FINRA arbitration tends to be more cost-effective, as it has lower filing fees and streamlined procedures.
- Less Burdensome Discovery: Discovery is the exchange of relevant documents and information. In a lawsuit, discovery consists of depositions, interrogatories, and the exchange of documents. In FINRA arbitrations, depositions and interrogatories are generally not allowed. As a result, the discovery process is more streamlined, less burdensome, and less costly.
- Confidentiality: FINRA arbitration proceedings are generally confidential, whereas court proceedings are a matter of public record.
Who Can Initiate FINRA Arbitration?
Parties who can initiate FINRA arbitration include investors, brokerage firms, and individual brokers. Many arbitrations arise over investment losses. Investors often file arbitration claims against their brokerage firms when the firm or its agent broker recommends investments that are not suitable and in the best interest of the investor. Investors also file arbitration claims when their brokers misrepresent or omit material information at the time of the recommendation. Common claims brought by investors include unsuitability, violation of Regulation Best Interest (RegBI), misrepresentation or omission of material information, unauthorized trading, churning, breach of fiduciary duty, and financial elder abuse.
The FINRA Arbitration Process
- Filing a Claim – The process begins with the filing of a Statement of Claim by the aggrieved party. The respondent (the party against whom the claim is filed) is then given the opportunity to respond
- Arbitrator Selection – The parties select arbitrators from FINRA’s roster of arbitrators using a strike and rank system. The number of arbitrators that serve on an arbitration panel varies depending on the size of the complaint.
- Discovery – The exchange of relevant documents and information.
- Hearing – A hearing is held where both parties present their cases, including evidence and witnesses. The arbitrators evaluate the evidence and arguments presented.
- Award – The arbitrators deliberate and issue a written decision. This decision is final and binding. Parties are generally required to abide by the decision, and there is limited scope for appeal.
Settlement
At any time during the arbitration process, the parties can resolve their dispute by entering into a settlement. Approximately 69 – 70% of all FINRA arbitrations are resolved through settlement instead of a hearing.
Conclusion
Investors who have suffered investment losses should be aware of their rights to pursue arbitration when disputes arise. Legal representation is often advisable to navigate the complexities of the process effectively.
Investors involved in a securities-related dispute are encouraged to consult with attorneys who have vast experience in FINRA arbitration to help them navigate the process and ensure that their rights and interests are protected throughout the proceedings.
About Iorio Altamirano LLP
Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.
We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.
If you have suffered investment losses, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (855) 430-4010.