FINRA Rule 2268: Requirements When Using Predispute Arbitration Agreements for Customer Accounts

finra rules 2268In the modern world, most brokers and brokerage firms require their customers to sign a customer agreement before entering into a relationship.

Typically, that agreement will contain a predispute arbitration provision.

Should a dispute arise between you and your broker, this provision will require that your case be settled through arbitration.

Under U.S. law, these forced arbitration clauses are generally enforceable, assuming that the agreement is crafted properly. FINRA Rule 2268 outlines the securities industry requirements for predispute arbitration agreements. Here, our team discusses this rule, and what it means for investors.


Signing a Predispute Arbitration Agreement? Here are Five Things You are Agreeing to

First and foremost, it is important to know what you are agreeing to when you sign your brokerage firm’s standard customer agreement form.

Specifically, in regards to predispute arbitration clauses, investors will generally be agreeing to the following five key points:

  1. By signing a customer agreement with an arbitration provision, you are giving up your right to bring a lawsuit, except insofar as is provided by the rules of the arbitration forum in question.
  2. If your case does go to arbitration, the arbitrator’s award will be final, except with very limited appeal rights.
  3. Discovery under the FINRA arbitration process is somewhat more limited than it is in normal court proceedings.
  4. The arbitrator selected in your case may not always be required to explain the reasoning behind their decision regarding your claim.
  5. You must follow all of FINRA’s filing deadlines related to your claim. The failure to do so could result in you losing out on your legal rights.


Three Things That Must Be Included In a Predispute Arbitration Agreement

To ensure that a predispute arbitration clause is valid, and actually enforceable, registered investment advisors and registered brokerage firms have legal obligations to make the clause conform to certain basic industry requirements.

Specifically, under FINRA Rule 2268, the predispute arbitration provision must contain the following three required elements:

  1. When a customer agreement contains a predispute arbitration clause, the clause cannot be tucked deep into the agreement. Instead, there must be a clear notation indicating the existence of the arbitration clause that is made directly above the signature line. This notation must also refer to the page number where the full text of the provision can be found.
  2. A complete and accurate copy of the customer agreement that contains the predispute arbitration clause must be provided to the client within 30 days of the date the agreement was signed.
  3. Finally, predispute arbitration clauses must always be fully consistent with the industry rules promulgated by the Financial Industry Regulatory Authority (FINRA). If not, then the mandatory arbitration clause may be thrown out.


Get Legal Help Now

At the Sonn Law Group, we have extensive experience representing investors through FINRA arbitration proceedings. For help with your case, please call us today at 844-689-5754 to set up your fully confidential, free initial legal consultation. From our primary office in Aventura, FL, we represent wronged investors throughout the U.S., Mexico, Puerto Rico and South America.