What to Expect When You File for Securities Arbitration


If you have suffered losses in your brokerage account due to broker fraud, the primary way to recover your losses is by filing for securities arbitration with the Financial Industry Regulatory Authority (FINRA). Federal regulations require all registered brokers to arbitrate disputes with their clients through FINRA, and FINRA arbitration is generally quicker and more cost-effective for investors when compared to seeking to recover their losses through litigation.

Nine Steps in FINRA Securities Arbitration

Here is a brief overview of the FINRA arbitration process:

1. Claim Submission and Analysis

The process starts with the investor filing a claim with FINRA. There are three basic filing requirements: (i) a Statement of Claim, (ii) a FINRA Submission Agreement, and (iii) filing fees. Once FINRA receives these, it will analyze claim to determine the nature of the dispute, the type(s) of securities involved, and how many arbitrators to assign to the case.

2. Service of the Brokerage or Broker

After FINRA analyzes the claim, it will serve the broker or brokerage with a case packet by mail. This is different from traditional litigation, where the plaintiff is responsible for serving the defendant.

3. Answer Submission and Analysis

Once served, the broker or brokerage has 45 days to file a written answer. FINRA will review the answer to identify any new issues (which may require the involvement of third parties or additional filing fees), and then notify the parties that it is time to select their arbitrators.

4. Arbitrator Selection

Each party receives an identical list of potential arbitrators, along with summaries of the arbitrators’ backgrounds and case histories. The parties typically strike certain arbitrators and rank the rest, and their rankings are used to select the arbitrator(s) assigned to hear their case.

5. Initial Pre-Hearing Conference

The parties’ and their attorneys’ first interaction with the arbitration panel is typically in the form of a pre-hearing conference held via telephone. This conference is used to discuss scheduling, the possibility of mediating the dispute instead of arbitrating, and other procedural matters.

6. Discovery

The next major phase of the securities arbitration process is “discovery.” During discovery, the parties must disclose certain records and information to one another, and they must also exchange lists of witnesses. Unlike discovery in litigation, which can often be extraordinarily complex (and expensive), discovery in arbitration is designed to be a much more limited and straightforward process.

7. Hearings

Following completion of discovery, the parties’ lawyers will prepare to present their cases to the securities arbitration panel. This is done through questioning of fact witnesses and expert witnesses, whose testimony (along with exhibits and the attorneys’ opening and closing statements) will form the basis for the arbitrators’ final decision.

8. Arbitrator Deliberation

After the final hearing, the arbitration panel will deliberate in order to reach a decision. The arbitrators reach their decision by majority vote.

9. Issuance of Arbitration Award

Finally, the arbitration panel will issue its award. Arbitration awards are usually issued within 30 days of the final hearing. Unless either party attempts to challenge the award in court, the broker or brokerage firm must pay any amount awarded within 30 days.

Broker or Brokerage Dispute? Contact Zamansky LLC for a Free Consultation

If you believe that you may have suffered fraudulent investment losses at the hands of your broker or brokerage firm, the attorneys at Zamansky LLC may be able to help. To find out if you are eligible to file an arbitration claim with FINRA, call us at (212) 742-1414 or request a free consultation online today.