If you have been the victim of stockbroker fraud or brokerage firm negligence, you will have to resolve your claims for recovery of investment losses through FINRA arbitration

FINRA arbitration is a mandatory dispute resolution process that you agree to simply through opening a brokerage account with a member firm. This type of resolution process uses a panel of one to three neutral arbitrators to hear your case instead of the usual judge and jury, to determine your claim for damages as a result of your securities losses. 

The FINRA Arbitration Agreement

Many people are surprised to learn that they have agreed to arbitrate their claims for stock market losses due to negligence or fraud through FINRA arbitration. If you signed a contract to open a brokerage account, it is likely that that contract contains specific language as follows which is required by FINRA Rule 2268 :

This agreement contains a pre-dispute arbitration clause. By signing an arbitration agreement the parties agree as follows:

(1) All parties to this agreement are giving up the right to sue each other in court, including the right to a trial by jury, except as provided by the rules of the arbitration forum in which a claim is filed.

(2) Arbitration awards are generally final and binding; a party’s ability to have a court reverse or modify an arbitration award is very limited.

(3) The ability of the parties to obtain documents, witness statements and other discovery is generally more limited in arbitration than in court proceedings.

(4) The arbitrators do not have to explain the reason(s) for their award unless, in an eligible case, a joint request for an explained decision has been submitted by all parties to the panel at least 20 days prior to the first scheduled hearing date.

(5) The panel of arbitrators may include a minority of arbitrators who were or are affiliated with the securities industry.

(6) The rules of some arbitration forums may impose time limits for bringing a claim in arbitration. In some cases, a claim that is ineligible for arbitration may be brought in court.

(7) The rules of the arbitration forum in which the claim is filed, and any amendments thereto, shall be incorporated into this agreement.

Even if you did not sign a contract agreeing to arbitrate your claims, if your stockbroker or brokerage firm is a member of FINRA (which most are) you have the right to force them into FINRA arbitration. As a brokerage firm customer, you have the power to require that  your broker resolve your dispute in FINRA arbitration even without a specific agreement to arbitrate. In any event, a careful review of the documents that you signed when you opened your  brokerage account will detail the specific arbitration terms that apply to you.

Your FINRA Case

If your case is filed with FINRA, whether by choice or agreement, your arbitration will follow some very specific rules. The case is initiated by filing what is known as a “Statement of Claim.” The FINRA statement of claim is the document that tells the brokerage firm and broker the basis of your claim. The most common securities arbitration claims are as follows:

Typical Securities Arbitration Claims

  • Unsuitability
  • Breach of Fiduciary Duty
  • Negligence
  • Fraud
  • Misrepresentation of Omission of Material Facts
  • Churning
  • Failure to Diversify
  • Unauthorized Trading
  • Elder Abuse
  • Failure to follow instructions

An experienced FINRA attorney will know the best way to draft your securities arbitration statement of claim

You Must Bring Your Claim on Time 

Each state has its own securities laws or common laws that may also apply. Depending on the type of the claim and the state where the case is filed, there may be different time limitations (called statutes of limitation) within which customers  must file their claim, even in a FINRA arbitration. There are also specific FINRA eligibility rules which could bar your claim if you do not bring it within a specified time period after the occurrence or event giving rise to the claim.  Asking an experienced attorney “how long do I have to sue my stockbroker” is very important.  For this reason,  if you suspect that your stockbroker’s  improper conduct has contributed to your investment losses, you should immediately contact an experienced FINRA arbitration attorney to protect your rights!

Consulting a seasoned and experienced investment fraud attorney will help you decide whether you have a claim and the chances that you have of being successful in bringing a securities arbitration action.  A FINRA attorney will discuss with you risks and benefits of filing a securities arbitration against your broker or brokerage firm. 

The FINRA Arbitration Process

Once your claim is filed and the broker or brokerage firm files an Answer to your statement of claim, FINRA will send a list of  proposed arbitrators to your attorney. An experienced FINRA attorney will have the expertise to select and rank those arbitrators and will strike others from that list. FINRA then takes that arbitrator list, as well as the list of the opposing party, and creates a panel of one to three arbitrators from the ranked arbitrators  (depending on the size of your case). The panel of arbitrators will then conduct a prehearing conference during which time the dates are chosen for the final hearing and a discovery and motion schedule are set. The case then moves to the discovery phase where both sides exchange specified documents and information with each other. Generally, unlike in a court action,  discovery is limited to this exchange of documents and there are no oral depositions. After discovery is over and any motions are heard, the case is ready for a final hearing. This is usually done in person, although during the pandemic FINRA has offered a Zoom option if the parties agree or the panel orders it.  During the arbitration hearing, the arbitrators will hear the relevant evidence and arguments of the lawyers and reach a decision.  Most arbitrations last about 3-7 days depending on the number of witnesses and documents offered. After the final closing arguments the panel has thirty days to issue their decision which is called an “award.”  The award is almost always final and binding since the grounds for appealing them are extremely limited. 

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Not everyone who loses money in investment has a valid securities fraud claim. However, under certain circumstances where misconduct or violations of securities laws and rules have occurred, investors may have the right to seek legal recourse. If you or a loved one have suffered investment losses as a result of an investment scam, Ponzi scheme, or any other type of investment fraud or broker negligence, 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 844-635-1609 or 305-349-2336