If you have lost money in your investments you might just chalk it up to the stock market or the performance of your investment. There are many investors who simply shrug off their investment losses due to market conditions, when in fact it may be the fault of their stockbroker or financial advisor. For example, it could be that the investment was unsuitable for you, or that the risks of the investment were not fully disclosed. One popular way to recover your losses is by mediating your claims by hiring an investment fraud lawyer. The Financial Industry Regulatory Authority  (“FINRA”) has a mediation program that allows for a fast settlement of claims recovery of losses for investors.

What is the Difference Between Mediation and Arbitration?

If you opened a brokerage account, chances are you are limited to arbitrating your case through the FINRA dispute resolution forum. When you hire a FINRA arbitration attorney, he or she will file your claim with FINRA and go through the process of document discovery and prepare for your final arbitration hearing. Generally, your arbitration claim will follow a parallel track where your FINRA attorney prepares your case for a final hearing, but, at the same time, the parties can agree to engage the services of a FINRA mediator to help resolve the dispute. 

FINRA Mediation Differs From FINRA Arbitration 

Resolving your case through FINRA mediation differs from resolving it through a FINRA arbitration hearing. A final arbitration hearing is where arbitrators hear your claims, listen to the witnesses (including experts),  examine the evidence and arguments of your attorneys, and make a final award that is binding and generally not subject to an appeal.  On the other hand, mediation is really nothing much more than a settlement conference conducted using an experienced mediator. In a FINRA mediation, the mediator cannot bind either party to a settlement amount,  but instead the mediator facilitates settlement discussions. The mediator is typically someone experienced in FINRA arbitration who can help both parties by evaluating the strengths and weaknesses of their positions in the case. By agreeing to a settlement amount in mediation, the parties can control the outcome of their case and not leave it up to a panel of arbitrators to decide their claims.  

Sometimes experienced attorneys negotiate a settlement directly with the attorneys on the other side of the case. But, in cases where one client may be stubborn or if the direct settlement is ineffective, it helps both sides to have a mediator, who is an objective third party, to evaluate the case and guide the parties to a successful settlement. 

There are only a handful of mediators who specialize in securities arbitration cases. An experienced FINRA attorney will know these mediators and choose one that is right for your case. 

Who Pays the Mediator?

Typically, the parties must initially agree to share the cost of the mediator, which can sometimes run up to several thousand dollars. While this fee may seem large, it is significantly lower than the cost of paying the FINRA arbitrators their daily rate to hear your case at an arbitration hearing.  

Sometimes, at the end of a mediation, the parties can agree to have the Respondent brokerage firm or financial advisor pay the full mediator’s fee (or a large part of the mediator’s fee) as a part of the settlement. 

FINRA Just Announced a COVID-19 Reduced Fee Mediation Program 

Almost every FINRA arbitration goes through the mediation or settlement process, and in fact, the arbitrators are instructed to tell the parties early on in the case that FINRA has a mediation program.

FINRA’s most recent Initial Prehearing  Arbitrator’s script, dated March 19, 2021, mandates that the arbitrators notify the parties of the following:

Mediation. We want to remind the parties that FINRA Dispute Resolution Services has a successful, voluntary mediation program. Mediation is an informal process in which a mediator facilitates negotiations between disputing parties. The mediator’s role is to help the parties find a mutually acceptable solution to the dispute. Parties who mediate at this forum resolve four out of every five cases. 

FINRA Dispute Resolution Services mediators are trained and experienced in helping parties resolve their disputes. In addition, many are experienced arbitrators, attorneys, and securities industry professionals knowledgeable in employment and securities issues. 

The mediation process is designed to proceed on a parallel track with this arbitration, so it does not interfere with the scheduled hearing dates or other matters agreed to during the course of this pre-hearing conference. If you are interested in mediation, contact the staff member assigned to this case for more information. 

COVID-19 Reduced Fee Program FINRA is currently offering to parties in arbitration cases the remote use of the mediation process (via Zoom and/or by telephone) at a reduced rate. The COVID19 Reduced Fee Program features the following benefits:

1. Parties will receive a random list of 10 national mediators along with their Mediator Disclosures for consideration and ranking;
2. The mediator payment for his/her service is $100 an hour split by the parties; and
3. FINRA waives mediation filing fees and administrative fees (FINRA receives no revenues).

Where Can I Mediate My FINRA Case?

In the usual case, mediation takes place in the city where the investor lives.  Since the advent of COVID, however, most are being conducted virtually via the Zoom platform. Virtual mediations are being done quite successfully and are proving to be a cost-effective alternative to live, in-person mediation. With the costs of travel and time out of the office lessened for the brokerage firm or investment advisors, there may even be an incentive for them to offer more in settlement due to these cost savings. 

Is My Mediation Confidential?

Mediations are conducted in a private and confidential manner. Any settlement offers, admissions by the parties, evidence, damages charts, and damage calculations used in the mediation are not admissible in any future proceedings. Similarly, the mediator will not discuss any confidential information provided by one party to another without their express permission.

What is the Benefit of Mediation In Recovering My Investment Losses?

The majority of cases that are mediated result in a settlement when an experienced FINRA mediator is used. Even if your case does not settle at mediation, just having the opportunity to actually observe your opposing party, as well as the credibility of the parties and their attorneys in mediation, can help better prepare you for the final hearing. Remember, even if your case does not settle at mediation, it could begin the settlement process and then settle sometime later. 

Can I do a Direct FINRA Mediation Without Filing a FINRA Arbitration?

FINRA allows an investor to file a direct request for a mediation against a brokerage firm or broker without filing an arbitration.  You may file such a request yourself or by using an experienced FINRA mediation attorney. However, since mediation is a voluntary process — no party is required to mediate a dispute. When FINRA receives your request, the Office of Dispute Resolution staff will contact the other party or parties to the dispute to explain the mediation process and seek their agreement to mediate.

Would You Like to Mediation or Arbitrate your Claim for a Financial Advisor Loss?


If you or a loved one have suffered investment losses contact the offices of Investment Fraud lawyer Melanie Cherdack for a free consultation. Because she has been in the trenches as a former Wall Street attorney, Melanie Cherdack and her team of experienced attorneys have seen just about every type of investment fraud or investment scam. While almost every investment carries a degree of uncertainty and risk, you may have been unnecessarily exposed to such risk. Former Wall Street Securities Attorney Melanie S. Cherdack and her team of lawyers represent individual and institutional investors who are unwitting victims of investment fraud and broker negligence. She heads up a group of attorneys who represent investors across the United States. Contact us by filling out our online contact form, or calling 888-768-2499 or 305-349-2336.