Many people fear that arbitrations strongly disfavor investors because they are too expensive and deprive investors of the opportunity to present their case to a jury of their peers. While it is true that investors cannot present their case to a jury in an arbitration proceeding, FINRA arbitrations offer many potential benefits to investors.
- You select the arbitrators, and the hearing will take place near your home.
Most FINRA arbitrations are decided by a three-person arbitration panel, but the parties have a role in selecting those arbitrators. FINRA sends the parties a list of 30 potential arbitrators for the parties to rank, and FINRA does its best to ensure that all of the candidates are from the same locale as you. In addition, your arbitration hearing will take place in your own backyard at the hearing location closest to your residence. FINRA offers 72 hearing venues, with at least one in each state in the U.S.
- FINRA arbitration is generally relatively quick and inexpensive.
Cases filed in federal or state court can drag on for years. In contrast, you can expect to have a hearing before the arbitration panel in a FINRA arbitration within one to two years after initiating the arbitration. Moreover, the cost of a FINRA proceeding is relatively low. It typically costs about $1,500 to file a FINRA arbitration. And because the arbitration hearing will take place near your home, you will likely not incur significant costs of travel to the hearing. Importantly, you can expect to receive a decision from the arbitrators within 30 days of the end of the hearing.
- Motions to dismiss are heavily disfavored.
In court, parties may file a number of different motions before the final trial in an effort to delay the proceeding or to have the matter dismissed in its entirety. In contrast, FINRA’s rules strongly discourage the filing of motions to dismiss in advance of the final arbitration hearing, and FINRA only allows the filing of motions to dismiss in three limited circumstances. As such, it is highly unlikely that your case will be dismissed before you have been able to present your case at the hearing before the arbitration panel.
- The discovery process is quick and efficient.
In court, defendants regularly dispute what documents and information are relevant to the case and refuse to produce many relevant documents unless ordered to do so by the court. Cases filed in court also allow for the depositions of many different people (including plaintiffs) in advance of the final trial. FINRA discovery prevents these actions. FINRA’s discovery process encourages the parties to work cooperatively to exchange documents, and ensures that you will be able to obtain all relevant documents and information needed to prosecute your claims. FINRA also helps curtail expensive discovery by only allowing depositions in very limited circumstances.
- Arbitrators have considerable discretion regarding what remedies they may award.
If your case goes to hearing, the arbitrators have wide discretion in awarding appropriate damages to you. The informality of the arbitration process allows for the arbitrators to issue awards that they deem to be “fair.” Arbitrators also have authority to award exemplary or punitive damages and attorney’s fees to the prevailing party, to award interest on any award rendered, as well as to force the losing party to pay the costs of the arbitration.
- A FINRA arbitration award is much more likely to be “final.”
In court, if a party loses the case, the party will likely appeal the decision to a higher court. In FINRA arbitration, the chances of overturning an award are quite low. While there are limited grounds on which to review an arbitration decision, courts have observed that they must give extreme deference to the determination of the arbitration panel. Courts have noted that by agreeing to arbitrate, a party trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expediency of arbitration. Courts do not have the authority to review arbitration decisions on their merits; rather, courts may only examine whether the arbitration award was procured by corruption, fraud, or undue means or whether the arbitrators were guilty of misconduct or exceeded their powers. As a result, a FINRA arbitration award is generally upheld.