FINRA arbitration can be a confusing concept to understand and a complicated process to undertake. Read on to have the FINRA arbitration process demystified.
What Is the Difference between Arbitration and a Court Proceeding?
Arbitration is an alternative option to litigation or mediation that allows investors to promptly and inexpensively resolve securities disputes against brokerage firms and/or brokers. Unlike court filings, arbitration is generally confidential: the only publicly available information about the dispute is information posted on FINRA’s Arbitration Awards Online Database, should an award be issued at the conclusion of the case.
What Is the FINRA Arbitration Process?
The arbitration process begins when an investor (or other party) files a Statement of Claim, Submission Agreement, and any other supporting documentation with FINRA. In the Statement of Claim, the filing party provides a detailed, chronological description of the events pertaining to the dispute, including the parties involved and the damage amount requested. The damage or relief amount can include monetary damages, interest, and specific performance. The Submission Agreement lists the parties in the arbitration case, confirms that FINRA will be the administrator, and confirms that the claimant and the respondents will abide by the arbitrators’ decision. Once all initial paperwork is filed and the claimant pays the initial arbitration fees, FINRA will serve the papers to the respondents identified in the dispute.
How Much Does FINRA Arbitration Cost?
Arbitration fees vary based on the total amount of your claim. Filing fees range from $50 dollars for claims of $1,000 or less to $2,250 for claims of $5 million or more. FINRA does, however, provide the option to submit a fee waiver for parties experiencing financial hardship. FINRA will refund the portion of the filing fee that it has not used if the dispute is settled or withdrawn more than ten calendar days before a scheduled hearing. For cases that proceed to a trial, clients can end up owing FINRA additional fees above the filing fee. The amount is dependent on how many hearing days are needed to try the case.
Who is on an Arbitration Panel and What is Their Role?
Arbitration panels are comprised of one to three neutral, qualified individuals that are selected and agreed-upon by the filing party and the respondents. This panel will read the pleadings filed by the parties, listen to the arguments, study the documentary and/or testimonial evidence, and render a decision or “award.” As agreed upon in the Submission Agreement, all parties must abide by the award, which is final and binding on all parties unless challenged in court.
Do You Think You Have a Claim to File in FINRA Arbitration?
Jason Albin is an attorney at Chapman LLC who has helped hundreds of investors recover millions of dollars lost as a result of broker negligence and fraud. If you have lost your savings due to bad advice from your broker or advisor, call Jason at 1-877-410-8172 for a free consultation to determine your legal rights.