Frequently Asked Questions about FINRA Arbitration
What is FINRA Arbitration?
The Financial Industry Regulatory Authority (“FINRA”) is the
self-regulatory body of the securities industry. FINRA provides a forum
for public customers to bring claims against Broker-Dealers and Registered
Representative members of FINRA.
Am I required to arbitrate my dispute with my broker?
Yes, generally. The account agreement you signed to open your securities
account most likely contains a provision requiring you to bring any claims
in arbitration at FINRA.
How is FINRA Arbitration different than being in court?
FINRA Arbitration is faster, significantly cheaper and private. Except
for the “in person” hearing at the end of the case, the vast
majority of the case is conducted via mail and via telephone. Motions
to Dismiss are disfavored in FINRA Arbitration. This means that absent
a settlement before the hearing the case will go to hearing. Unlike court,
FINRA Arbitration is binding with no right of appeal. There are no depositions
in FINRA Arbitration and no right to a jury trial. The case is heard by
a three member panel.
How does FINRA arbitration work?
The public customer files a written Statement of Claim at FINRA. The Broker-Dealer
and/or Registered Representative file a written response to the Claim.
Through a joint elimination process the parties jointly select an Arbitration
Panel. Discovery is conducted by the parties and documents are exchanged.
If the case does not settle, a hearing is conducted before the full panel.
A hearing usually takes 3-5 days. The panel hears the evidence and 30
days after the conclusion of the hearing issues a written Award. The Award
usually does not state the reasoning for the decision.
How are the arbitrators selected?
FINRA arbitrators are local lawyers and people from the securities industry
who agree to serve on panels. Each panel has two members from the public,
typically lawyers, and one member from the securities industry.
How long will it take to get my case to hearing?
Generally, one year from the date of filing the Statement of Claim. FINRA
tries to expedite the case if the Claimant is elderly.
Is the hearing public?
No, the hearing is private. The hearing is held either in a conference
room at the regional FINRA office or in a hotel conference room.
What does it mean that FINRA arbitration is "binding"?
Except in extraordinarily limited circumstances, you will not be able to
appeal a FINRA Award.
Does FINRA arbitration favor the broker-dealer?
No. FINRA panels are intelligent fact finders who will decide the case
on the merits.
Are the arbitrators required to follow the law?
Although some states may allow a very limited potential right of appeal
for “manifest disregard” of the law, generally panels are
not required to follow the law since FINRA Arbitration is considered an
“equitable” forum. This means the panel has great discretion
to make a determination and fashion an Award.
Baldwin Mader Law Group has provided the materials on this website for
informational purposes only. The information herein does not constitute
legal advice and the use of this site does not create an attorney-client
relationship. As each case and set of facts is unique, this website is
not intended to be a substitute for specific legal advice from a qualified
legal professional. This web site is designed for general information only.