When you opened up an account with your stockbroker, you invariably signed an agreement which included a provision requiring you to arbitrate any claims you have against your brokerage firm or its employees in an arbitration forum provided by the Financial Industry Regulatory Authority’s (“FINRA”) Office of Dispute Resolution. It is well-settled law that the arbitration clause, if signed by a legally competent customer, is binding and enforceable.
So what have you gotten yourself into? All things considered, you are probably in a decent place. FINRA arbitrations are a cost-effective and relatively quick way of resolving disputes with your stockbroker. Disputes between customers and broker-dealers and/or their registered representatives are administered pursuant to FINRA’s Code of Arbitration Procedure for Customer Disputes (the “Code”)
The typical FINRA arbitration action is scheduled for hearing with 15 months of the filing of the statement of claim;
Most arbitrations actions are settled before hearing;
Discovery is generally limited to an exchange of documents and requests for information requested by the parties and documents subpoenaed from non-parties. The parties are presumptively required to produce categories of documents set forth in the Discovery Guide, but may request of the opposing party additional documents relevant to the facts of the case. There are generally no discovery depositions and motion practice is limited.
FINRA FEES AND NUMBERS OF ARBITRATORS:
Filing fees vary based on amount in controversy:
- $50 (cases requesting damages below $1,000); up to
- $2,250 (cases requesting damages over $5,000,000).
Numbers of arbitrators also vary based on amounts in controversy:
- one arbitrator (cases requesting damages below $50,000);
- one arbitrator unless the parties agree to three in writing (cases requesting damages between $50,000 - $100,000);
- three arbitrators unless the parties agree to one in writing (cases requesting damages over $100,000).
In cases seeking damages less than $50,000, the arbitrator may decide the case on the documents and pleadings, unless a party requests a hearing.
FINRA ARBITRATOR SELECTION
The arbitrators, who will hear the case, are generally selected from a roster of FINRA arbitrators (the “Neutral Roster”) in the vicinity of the hearing location and are selected through a process that gives each party the right to strike and rank arbitrators from three lists: 1) the chair list or arbitrators qualified by FINRA to be principally responsible for the conduct of the arbitration; 2) the public list of arbitrators with no affiliation with the securities industry; and 3) the non-public list of arbitrator with some affiliation with the securities industry. Customers have the right to strike all non-public arbitrators from consideration.
FINRA hearing sites are conveniently located all over the country. FINRA assigns a case to the hearing location nearest to the customer’s residence at the time of the events in question.
Depending upon the witnesses needed to be called, hearings generally last from two to five days, but hearings of complex cases be considerably longer. In addition to the testimony of the parties and their fact witnesses, the parties may want to call expert witnesses to address issues of damages or liability. The decision of the arbitrators, known as the Award, is usually received within 30 days of the conclusion of the hearing.
If you have questions about this process, please contact us.
McCausland Keen + Buckman represents investors in securities arbitration and litigation matters involving disputes with brokerage firms, investment advisors and other financial institutions. If you are an investor with concerns about your broker-dealer, your securities portfolio, or a particular investment, please contact us for an evaluation – at no cost or obligation to you. You may have a viable claim for recovery of your investment losses by filing an arbitration claim with FINRA, the Financial Industry Regulatory Authority.