The Financial Industry Regulatory Authority (FINRA) is an non-governmental body that independently regulates firms that operate in the securities industry. In all, through its two dozen regional offices around the country, FINRA oversees several thousands brokerage firms and hundreds of thousands of registered financial advisors and brokers. Beyond enforcing securities industry regulations, FINRA also oversees an arbitration process that helps to resolve disputes between investors and brokers.
A Look at FINRA and Enforcement
When firms or individuals commit violations, FINRA has the authority to take corrective enforcement action. Indeed, FINRA is able to both fine companies and individuals and, when the circumstances permit, suspend firms or representatives or bar them from the securities industry entirely. For additional perspective on FINRA and the enforcement of industry standards, consider their official disciplinary report for 2014. In total, FINRA:
- Brought nearly 1,400 enforcement actions;
- Fined firms and individuals more than $130 million collectively;
- Temporarily suspended 705 brokers and barred another 481 from the industry; and
- Suspended 5 firms while expelling another 18 from the industry permanently.
FINRA Facilitates Dispute Resolution
FINRA also seeks to help facilitate the resolution of disputes by operating an arbitration process. In 2016 (through the end of November) FINRA reports that 3,394 new arbitration cases have been filed. Approximately 70 percent of these arbitration claims were filed by customers, while the other 30 percent involved intra-industry disputes. In many ways, a FINRA arbitration proceedings can be thought of as similar to a mini, hyper efficient, version of a trial. Of course, the FINRA arbitration process also includes many of its own highly technical and industry specific rules and regulations.
If you are an investor who believes that you were the victim of fraud, and you are now set to go through the FINRA arbitration process, you need to seek professional legal help. Investors should never go through arbitration on their own. Please contact a qualified investment fraud attorney who can best protect your legal rights and help you recover maximum compensation. While all FINRA arbitration proceedings have their own unique characteristics, below we have provided a brief overview of the process and the rules to give you a better understand of how it works.
FINRA Arbitration: An Overview of the Process
Step 1: File a claim
The first step to filing a claim for FINRA arbitration begins with submitting all forms of required documentation. Most importantly, investors should include a thoroughly completed Statement of Claim. Within a Statement of Claim, investors have the opportunity to outline their entire case. Additionally, investors should always include any supporting evidence that they have as well as technical documents like a submission agreement and confirmation of payment of all filing fees. This part of the process set up the foundation of your case. If you do not complete all documents properly, your claim will be seriously undermined. The bottom line is that you should not initiate a claim without first consult with an attorney.
Step 2: Select an arbitrator
FINRA will then give each party to the dispute a list of potential qualified arbitrators. The list will include relevant information about each possible arbitrator. With your lawyer, you can review the arbitrators, and eliminate some of the ones that might not be right for your case. Further, you will be able to rank the ones you might want in order. The other party to your case will conduct a similar process. Then, a fair arbitrator will be selected. Selecting the right arbitrator is incredibly important because the arbitrator will have a lot of power to decide the merits of your claim.
Step 3: Go through the pre-trial conference
A pre-trial conference is generally conducted over the telephone. This part of the FINRA arbitration process is where the two or more parties will discuss key procedural issues. For example, you will deal with scheduling during the pre-trial conference. Depending on the facts of your case, there may be other important topics that need to be addressed during this part of the process as well.
Step 4: Conduct discovery
During the FINRA arbitration discovery process, the parties to the dispute will exchange and request information that they believe is relevant to the claim. This is where additional, hard-to-access evidence for the case can be obtained. As with all legal cases, discovery is highly complex. Further, FINRA has produced its own required discovery guidelines that must be followed by all parties.
Step 5: Attend the hearing
Next comes that actual arbitration hearing. The hearing generally proceeds as follows:
- Parties are allowed to give an opening statement;
- Parties may present any admissible evidence;
- Parties may call witnesses;
- Cross examination of witnesses can occur;
- The arbitrator may ask questions about the case; and
- Each side is allowed to give a closing statement.
Step 6: Await the Decision
Finally, the arbitration decision, usually referred to as an ‘award’, is typically rendered within one month of the actual hearing. Both parties will receive a written copy of this decision. FINRA decisions are legally binding. Further, there is no FINRA-based appeals process. In other words, in order to appeal that decision, the case must be taken to an actual courtroom. While a decision might potentially be overturned, it is unusual. Courts generally review a FINRA arbitrator’s decision on very narrow grounds. As such, the FINRA arbitration process must be taken extremely seriously from step one. The minute a dispute with a financial advisor or brokerage firm arises, please contact an experienced lawyer.
Contact an Experienced Investment Fraud Lawyer Today
If you or a loved one has been the victim of investment fraud, you need to act now. Please contact the passionate legal team at the Sonn Law Group today for an immediate review of your claim. We have extensive experience handling FINRA arbitration cases. Additionally, our team will review your case free of charge and we handle all investment fraud cases on a contingency fee basis, meaning we do not get paid unless we help you recover financial compensation.