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FINRA Arbitration | Financial Industry Regulatory Authority

The Kueser Law Firm, P.C. Represents Victims of Investment and Securities Fraud and Stockbroker Misconduct in FINRA Arbitration.

Jason M. Kueser is a FINRA arbitration lawyer representing clients in various securities and investment related matters.  The majority of the firm’s securities and investment arbitration and litigation practice involves representing clients in FINRA arbitration.  

Most investment account applications contain pre-dispute arbitration clauses.  By signing up for an account with a brokerage firm, an investor agrees to resolve any disputes relating to their account in FINRA arbitration.  As such, for most people who have issues with their stockbroker, financial advisor, or investment account, their only recourse is filing a claim in arbitration.  FINRA arbitration is similar to a lawsuit in court, but there are some significant differences, as outlined below.  Arbitration can be faster, less expensive, and less complex than cases filed in court.  Nevertheless, the rules in arbitration are nuanced, and, it is important to work with an experienced FINRA arbitration lawyer.   

In arbitration, the investor is generally referred to as the “Claimant” and the broker/financial advisor/brokerage firm is the “Respondent.”  The Claimant and the Respondent select one or more arbitrators to decide the case.  After considering the arguments and evidence presented by the parties, the arbitrators issue an award.  As with cases filed in court, many claims in arbitration settle prior to the arbitration hearing.

The Amount of the Arbitration Claim Will Ultimately Determine the Rules that Will Govern the Case.

If a Claimant’s claim exceeds $100,000, the parties will present their cases to a panel of three arbitrators during an in-person hearing.  For claims of less than $100,000, a single arbitrator will resolve the case.  If the claim is between $50,000 and $100,000, the case will involve an in-person arbitration hearing.  Lastly, for claims of $50,000 or less, the Claimant can submit their case through the simplified arbitration process.  In simplified arbitration, the arbitrator decides the case without an in-person hearing and based solely on written submissions from the parties.

Outline of the FINRA Arbitration Process

The following outline discusses the overall process of FINRA arbitration for cases involving an in-person hearing.

1. Statement of Claim.  

The first step in the FINRA arbitration process involves the Claimant filing a Statement of Claim (SOC).  While the rules regarding the SOC are not very specific, generally it will include the Claimant’s presentation of facts, allegations, and claims for the arbitrators to decide.  When the Claimant files the SOC, they must also pay a filing fee to FINRA.  The amount of the filing fee is based on the amount of the claim.  

2. Answer.  

The second step in the FINRA arbitration process involves the Respondent(s) filing an Answer.  In the Answer, the Respondent(s) state the facts from their perspective, as well as their affirmative defenses to the Claimant’s claims.  Generally, the Respondent has 45 days from the date the Claimant files the SOC to file the Answer with FINRA.

3. Arbitrator Selection.  

After the Respondent(s) file the Answer, FINRA sends the parties lists of potential arbitrators.  The Parties have the ability to strike a limited number of arbitrators and to rank the remaining arbitrators on the lists. Generally, the parties will conduct due diligence to determine which arbitrators to strike and how they would like to rank the remaining arbitrators.  Next, the parties submit their lists to FINRA, who will cross reference the lists to select the arbitrators.  In some instances, one or more of the arbitrators may be unable to serve on the case.  In that situation, FINRA will appoint a replacement arbitrator.  Nevertheless, the parties have the ability to challenge arbitrators.  However, there are limited grounds on which a party may challenge an arbitrator.

4. Pre-hearing Conference(s).  

After FINRA selects the arbitrators, the parties will participate in an Initial Pre-Hearing Conference (IPHC).  The IPHC is generally held by telephone.  During the IPHC, the parties and the arbitrator(s) discuss preliminary matters and schedule various deadlines relating to the case.  Additionally, the parties and the arbitrator(s) will schedule the arbitration hearing dates.

In addition to the IPHC, there may be other pre-hearing conferences.  These generally relate to discovery disputes or other matters that must be resolved prior to the arbitration hearing.

5. Discovery. 

Discovery is the process in which the parties gather facts and information to support their own case and prepare for the hearing.  The scope of discovery in FINRA arbitration is more limited than in cases filed in court.  For example, the FINRA Code or Arbitration Procedure does not generally permit the use of depositions.  Rather, FINRA generally limits the parties to participate in requests for production of documents and information.  

The FINRA Code of Arbitration Procedure requires the parties to cooperate with each other to the fullest extent practicable in the voluntary exchange of documents and information to expedite the arbitration process. 

As noted above, there are often disputes related to discovery.  In those instances, the parties generally file discovery motions with the arbitration panel.  This may result in a pre-hearing conference in which the parties will present arguments to one of the arbitrators who will then decide the discovery dispute.  

6. Additional Motions and Briefing.  

In addition to discovery motions, there may be additional motions filed in FINRA arbitration.  These include motions for the appearance of witnesses, motions for the issuance of subpoenas, motions in limine, motions, motions for sanctions, and more.

In most cases, the parties may also submit briefs to the arbitrators before the arbitration hearing.  These briefs summarize the facts the party intends to present at the arbitration hearing, as well as legal authority for their claims or defenses.

7. Arbitration Hearing.  

During the arbitration hearing, the parties will present evidence and make arguments in support of their case.  As noted on the FINRA website, the general format of the arbitration hearing is, as follows:

  • Swearing in of arbitrators, parties and witnesses;
  • Opening statement from each party (optional);
  • Claimant’s presentation of facts of the case to arbitrators, including documents and live or written testimony;
  • Respondent’s presentation of facts of the case to arbitrators, including documents and live or written testimony;
  • Presentation of any counter-claims, cross-claims or third-party claims;
  • Rebuttal evidence;
  • Closing statements (claimant can choose to go last);
  • Scheduling post-hearing submissions before closing the record; and
  • Arbitration panel closes the record.

8. Decision and Award.  

After the arbitration panel closes the record, they will convene and discuss the case.  They will make a decision as to which parties prevailed in the case and will issue an award.  

The FINRA Arbitration Process is Complicated. Contact a FINRA Arbitration Lawyer if you have questions about a possible claim.

It is generally recommended that you work with a FINRA arbitration lawyer if you have a claim against your financial advisor or stockbroker.  However, FINRA does provide information for parties who choose to file a claim in arbitration without a lawyer.  

Jason M. Kueser is a FINRA arbitration lawyer located in the Kansas City, Missouri area.  For more information about the firm’s Securities Arbitration & Litigation practice, please click here.  You can also call (816) 374-5865 to speak with a FINRA arbitration lawyer or complete the contact form to the right and an attorney will contact you shortly.

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