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The Basics of FINRA Dispute Resolution – What Investors Should Know

Posted: May 26, 2015 | Posted in:

For investors who suffer stock market losses as a result of improper conduct by their brokers, the Financial Industry Regulatory Authority (FINRA) arbitration process provides a relatively efficient method for seeking financial compensation. FINRA is an independent non-profit organization that Congress has tasked with regulating the U.S. securities industry. Its authority covers more than 4,000 securities firms and 600,000 individual brokers.

About the FINRA Arbitration Process

The arbitration process starts with filing a Statement of Claim with FINRA and paying the applicable filing fee. An experienced securities attorney will be able to help you determine your causes of action and prepare a comprehensive Statement of Claim. Depending on the amount of your losses, FINRA will typically appoint three arbitrators to hear your case.

It is important to note that FINRA’s arbitration guidelines require investors to submit a Statement of Claim within six years of the date on which the claim arises. If you do not file in time, FINRA will not hear your case – and you can still be prohibited from filing a lawsuit in court. Since it can be difficult to determine exactly when stock market losses occur, we recommend contacting an attorney as soon as you discover your losses.

Once you file your Statement of Claim, your broker and their securities firm will file a response.

Next are the initial prehearing conference and the process known as discovery. Attorneys for both sides must participate in the conference, which is when the arbitrators will set a date for your hearing – typically about nine months later. In the meantime, both sides will be required to disclose certain documents as mandated by the FINRA regulations applicable to your specific claims. These documents typically include:

  • Trading histories
  • Tax returns
  • Financial statements
  • Account records
  • Evidence of the broker’s or firm’s improper conduct

Finally, there is the arbitration hearing. The hearing follows the same general procedures as civil litigation involving securities disputes. Your attorney will present evidence to support your claims, and the attorney for the defense will try to produce contrary evidence suggesting that you are not entitled to compensation for your losses. In the end, the arbitration panel will issue a binding decision in favor of one side or the other on each of your claims.

What if I Win in FINRA Arbitration? What if I Lose?

If the arbitration panel rules in your favor, the securities firm or broker is required to pay you within 30 days. If they fail to do so, FINRA can suspend them from further market activity.

If you lose, the panel’s decision is generally final. Unlike judgments in civil court, there are limited prospects for appeal, except in certain specific circumstances.

Contact a FINRA Arbitration Attorney at Zamansky LLC

The attorneys at Zamansky LLC represent individuals who have suffered stock market losses at the hands of their securities firms and brokers. We have decades of experience representing clients in FINRA arbitration. To speak with an attorney about your stock market losses, contact us today.