10 Things You Need to Know about FINRA Arbitrations

By October 21, 2015 October 11th, 2017 Resources
  1. Arbitration is Final and Binding. Under FINRA rules and the Federal Arbitration Act, the result of an arbitration is almost always final and not appealable. Unless there has been some provable misconduct by an arbitrator, there is generally no appeal to the court system, even if the arbitrators have made a factual or legal mistake.
  1. The Arbitrators Don’t Have to Be Lawyers. The panel of possible arbitrators is maintained by FINRA. It includes lawyers and non-lawyers who have received some training regarding FINRA rules and the basics of investing.
  1. The Arbitrators Don’t Have to be Affiliated with the Financial Industry. Under the current FINRA rules, there is no longer a requirement that any of the arbitrators be affiliated with the financial industry. It is possible to pick a FINRA arbitration panel that has no lawyers and no industry representatives.
  1. The Parties Pick the Arbitrators. Using lists of approved arbitrators provided by FINRA, each of the parties uses a limited number of strikes and then ranks the lists of arbitrators. The results of both parties are tabulated and the top ranked arbitrators are appointed to the three person FINRA panel.
  1. 5. The Investor Doesn’t Have to Have a Lawyer. The rules don’t require that the investor be represented by a lawyer, but it helps to have one because the arbitrators are supposed to resolve disputes based upon the relatively complex laws and rules particular to investing.
  1. 6. The Proceeding Typically takes 12 to 24 months. From the date the arbitration is filed, it typically takes 12 to 24 months to get to a final award.
  1. Investors Win Something More than 50 percent of the Time. In over 50 percent of the arbitrations that go to hearing, the investor is awarded some money, although not always the amount that was claimed.
  1. The Hearing is Like a Trial, although Less Formal. The FINRA Arbitration Hearing is usually conducted according to the Rules of Evidence and witnesses are sworn and cross-examined as in a trial. There are typically opening and closing arguments and often legal memoranda filed by both sides.
  1. There is Limited Discovery. Parties can request documents from each other and receive certain basic documents as a matter of course, but there are generally no depositions and only limited written questions.
  1. Cases Aren’t Dismissed Before Hearing. Unlike court, the broker can’t file motions to dismiss or for summary judgment. The only motion that is typically filed is one that the case was not brought within 6 years of the “event” or “occurrence” giving rise to the claim.

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