The majority of disputes between investors and their stockbrokers or brokerage firms are resolved via securities arbitration sponsored by the Financial Industry Regulatory Authority (“FINRA”). This happens because the standard brokerage firm customer agreement contains a clause which provides that any investment related dispute is to be resolved in FINRA arbitration and that the customer waives the right to a file a complaint in court.
What is Securities Arbitration?
There are pros and cons to securities arbitration and court cases. Generally speaking, arbitration is a less costly, faster way to resolve investment disputes than court litigation. Most arbitrators are attorneys, securities industry professionals or business persons with some knowledge of investments. Contrast that with jurors in court cases, which are typically more diverse and, on the whole, less knowledgeable about investments. Unlike court cases, where appeals can drag the case out for years, there are no court-style “appeals” in FINRA arbitration and motions to vacate the award are extremely limited – so that in most cases, the FINRA Award is final. The typical FINRA arbitration takes about a year from commencement of the case to the issuance of a decision (called the Award). FINRA arbitrations are commenced by the filing of a Statement of Claim and a Submission Agreement and the payment of the filing fee.
There is a filing fee in most cases – typically $1,425, but varying depending on the amount of the claim. The filing fee is paid to FINRA. Lawyers who do this work on a regular basis are typically paid a fraction (typically one-third) of the amount recovered (i.e., a contingency fee) as opposed to an hourly rate, because that is what most clients want. The fee structure is agreed to by the client and attorney, and should be formalized in a written contract of representation.
How to Win as a Securities Arbitration Respondent
Securities arbitration is not a good do-it-yourself project. While investors are allowed to represent themselves in a FINRA arbitration if they wish, they would be at a severe disadvantage arbitrating against an experienced attorney representing the broker and/or firm. Investors are well-advised to consult with an experienced attorney as soon as a problem arises and not to try to negotiate with the broker or firm or their attorneys.
The attorneys at The Doss Firm, LLC have substantial experience representing investors in Securities Fraud situations. If you have a question about any of your investments, feel free to contact us for a free consultation.