Unlike traditional disputes that go to court, most securities disputes involving investment losses are required to go before a FINRA arbitration panel. This is because FINRA arbitration is the remedy most investors agree to in the fine print of their account-opening documents with brokerage firms. Instead of judges, FINRA arbitration is administered by a neutral arbitrator or a panel of three arbitrators (for claims over $100,000). Prior to the start of arbitration, the parties in the dispute each play a role in the selection of the panel that will hear your case. The arbitrators comprising the panel have varied backgrounds and are generally knowledgeable about investments and securities. Hearing locations are held across the country and typically in the city where you lived at the time of your dispute. After we present your case at the hearing, the arbitration panel considers all the evidence and determines whether to issue you a monetary award. The award may compensate you for your out-of-pocket losses or for whatever relief the panel deems just. For example, arbitrators are free to award additional punitive damages in your favor if the broker’s wrongdoing was particularly egregious.

Arbitration differs from traditional courtroom litigation in several ways, and these differences provide both advantages and disadvantages to arbitration. The upside is that the arbitration process is much faster and less expensive than the courts for resolving securities disputes. This is mainly because disputes in arbitration typically conclude in just over a year, whereas court cases can drag on for years if there are multiple appeals -- by contrast, arbitration awards are rarely appealed. The lower cost of arbitration is also attributable to its different procedural rules, which for instance do not permit for depositions or party interrogatories. Arbitration hearings are also not bound by traditional court rules that govern the admission of evidence. This means that an arbitrator may hear evidence against a broker that might otherwise not be admissible in court (e.g., hearsay evidence). Lastly, a major advantage to arbitration is that you can expect payment of your award much sooner than in court litigation. After the arbitration panel issues you an award, your case is usually over (since appeals are unlikely). The losing firm or individual broker is required to pay your award within 30 days, and they usually comply because FINRA will otherwise suspend or revoke their license and registration if they fail to make a timely payment.

The downside of arbitration is that it does not provide as broad a range of fact-gathering (or “discovery”) tools as permitted by the courts. For example, without access to depositions or interrogatories, it can be harder to obtain the evidence needed to support your allegations of broker misconduct. FINRA arbitrators also tend to be former finance professionals, and thus might be more sympathetic to the broker side of an argument. Without strong evidence, this can make winning some cases an uphill battle. To mitigate this, our firm plays a very active role in the arbitrator selection process. Upon filing a claim, we conduct a thorough background check and will move to disqualify any arbitrators who we believe would not be impartial in deciding your case. One final downside to arbitration is that if you lose your case, it is extremely difficult to overturn the decision of an arbitration panel on appeal. Should it be required, our firm is experienced in the appeals process, provided we can establish valid grounds to challenge the panel’s decision.

If you have suffered investment losses and are uncertain about the merits of your case, call us for a free consultation. We have experienced attorneys in representing investors in various types of securities disputes. We provide representation in every U.S. state and have an excellent success rate in recovering investor losses. Our firm works on a contingency fee basis, meaning we do not get paid unless you recover. We will never charge you for an initial consultation.