How FINRA arbitration works
Most disputes between investors and their brokerage firms or registered representatives are resolved in arbitration administered by FINRA, the industry's self-regulatory organization. The process begins with a statement of claim, the parties choose arbitrators from lists FINRA provides, and the case proceeds to a hearing before the panel. Smaller claims can be decided on the written submissions through a simplified procedure. Document exchange is narrower than in court, and awards are final in most cases, with very limited grounds for a court to set them aside. Hearings are generally held near where the customer lived when the events took place.
Claims that commonly come up
Securities arbitration claims often involve recommendations that did not fit the investor's situation, excessive trading in an account, trades made without authorization, or misstatements about an investment's risk. Gather your account opening forms, which record what the firm says it knew about your goals and risk tolerance, along with statements, trade confirmations, and any messages with the representative. Pay attention to what those forms say about your objectives, since firms often rely on them. FINRA has its own limit on how old a claim can be, separate from statutes of limitations, so do not let a potential claim sit.
Evaluating a claim
In a first conversation we review the account history and what you were told, and look at whether the representative or the firm has a disciplinary history, which is publicly available through BrokerCheck. We also discuss the cost of the process and whether the size of the loss justifies a full hearing. If you are a registered representative facing a customer claim, the same forum and rules apply, and your interests may differ from your firm's. Either way, we explain how the forum works and what a realistic path looks like before you commit. If the firm has closed or lacks the funds to pay an award, that affects whether a claim makes sense, so we look at it early.
