New to court? Here is the must-know process of arbitration with your FINRA attorney

Nearly all customer agreements with brokers and investment advisory firms contain required arbitration provisions.

For brokers who work under FINRA, the arbitration process takes place under the authority’s mandatory guidelines.

For public investors, reading the terms of your customer agreements and the other agreements about the required arbitration provision is critical.

Understanding the ins and outs of these documents will help you manage your claims successfully.

If you need your claims resolved quickly without spending an arm and a leg, read on to learn about the cost-effective and timely process of FINRA Arbitration.

Your FINRA Attorney And The Arbitration Process

The process for FINRA arbitration using a FINRA attorney is seen as quicker than litigation, and it is also a more cost-effective option to go about filing a claim.

The first step in the process is to complete a Statement of Claim that includes factual information that you feel justifies your need to receive compensation.

Some typically reported claims include unauthorized trading and misappropriation.

Additional claims that are commonly reported include:

  • Poorly suited investment suggestions
  • Churning
  • Lack of supervision
  • Theft

After discussing matters with your FINRA attorney and filing your Statement of Claim, an Answer is filed by the Respondents. The Answer will include the reasons they believe they are entitled to a recovery.

For both claims, requests for reimbursement will also be stated. After the initial steps, both parties will partake in discovery for six months.

This discovery period is the sharing and exchanging of documents between parties. After this period, the majority of the disputes are handled via negotiation and accommodations.

Should any disputes remain unresolved, a final arbitration process will be initiated.

The final arbitration usually takes place with your FINRA attorney in a conference room instead of a courtroom.

The final arbitration begins with an opening statement and proceeds to the Respondent’s beginning statement, followed by both parties’ callings of witnesses and expert witnesses that can explain the facts of the case to help the arbitrators better understand what is at stake.

Once all of the evidence is submitted, a deliberation will take place between the arbitrators until an award is rendered.

The award is delivered to both parties within a one month to 45-day period, directly following the end of the arbitration.

The arbitration results will determine which party owes money to the other or if a party has an option to debate the award in an independent lawsuit.

Why Consider FINRA Arbitration?

FINRA arbitration protocols are set up to make it easier for the claimant and the FINRA attorney to voice their claim directly to the arbitrators.

Assuming the filing is done quickly, claimants and the associated FINRA attorney can communicate their claims and recovery requests without being dismissed on technicalities.

The claimant saves money by going about discovery in FINRA arbitration over litigation or deposition alternatives because their depositions are not taken.

This fast-paced approach makes it most cost-effective for the claimants, the FINRA attorney, and everyone involved in addressing the matter.

Equity And Flexibility With Award Compensation

The awards rendered for damages are based primarily on equity instead of a lawful cause of action. This difference means that arbitrators can provide you with a monetary award to cover unfair treatment or broker violations.

The Advantages And Disadvantages of FINRA Arbitration

Mediators are often introduced in arbitrations to resolve disputes quickly.

Resolutions between parties and the FINRA attorney are frequently achieved with the mediators alone, given the unknown factors that pertain to the arbitrators themselves.

A common fear is that, because the arbitrators are not as invested in the case, the outcomes may not be resolved in the claimants’ best interest.

It is also less expensive and time-sensitive to utilize this fast-paced approach when applicable.

Award Payment Is Handled Effectively

Unlike the litigation process, the awards rendered through arbitrations are immune to attacks and overturns.

The seemingly indestructible nature of this award often persuades the Respondents to pay the amount rendered in the award instead of proceeding with a court for an overturn.

The timely payment of the rendered award keeps the process short and sweet for the FINRA attorney as well.

Moreover, FINRA requires that the Respondent’s legal ability to conduct business be terminated should a broker or related firm refuses to pay the award.

These risk factors make award payment a smoother process for the FINRA attorney, most of the time.

Investment advisors can decide if including an arbitration provision within their advisory agreements is necessary. They also hold the right to determine whether utilizing FINRA as their arbitration forum is essential.

Public Disclosures Create Conflict And Bias

Keep in mind that FINRA arbitration publicly discloses the rendered awards.

If either party’s counsel disagrees with the final awards, it is more likely that the FINRA attorney will ask the associated arbitrator to remove themselves from the case.

Be sure to do your research before selecting a counsel so you can feel secure in your decision to proceed with your FINRA attorney under this approach. 

To avoid being struck down, arbitrators may feel more inclined to take a neutral approach and create a compromised outcome for both parties.

By staying in the middle, they increase their chances of being selected for future cases. These factors increase the level of bias woven into cases, thus hindering the authenticity of the arbitrations.

The required arbitration provision requires that parties revoke their right to a judge and jury.

Some people take issue with the idea that public investors are offering money to figures who are making them relinquish this constitutional right.

The debate over whether litigation is more effective than arbitration is a matter of opinion.

The main advantages to arbitration include:

  • Being more cost-effective than litigation
  • Achieving quicker resolves than litigation
  • Offering more flexibility than litigation via the rendering of monetary awards 

For Fast Resolution, Contact A Counsel Today

If you need a fast way to handle your claim, FINRA arbitration can provide you with the resolutions you need without breaking the bank.


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