Our Lawyers Explain the Differences Between Going to FINRA Arbitration and Filing a Securities Fraud Lawsuit in Court
When you suffer fraudulent investment losses, you have two main options for recovering your losses from the party that is responsible (i.e., a company or your broker). The first option is arbitration with the Financial Industry Regulatory Authority (FINRA). The second option is litigating your claim in court. The FINRA arbitration and courtroom litigation processes are very different, and when pursuing a claim for securities fraud, it is important to know what you can expect along the way.
Understanding the Differences Between FINRA Arbitration and Securities Fraud Litigation
Here is an overview of the major differences between FINRA arbitration and securities fraud litigation:
Statutes of Limitations
Under FINRA’s Rules, investors generally have six years to pursue fraud claims against their brokers and brokerage firms. The statute of limitations for pursuing a securities fraud claim in court is either two or five years in most cases (there are exceptions; so, even if it has been more than five years, you should still consult with a lawyer).
Discovery and Pre-Trial (or Pre-Hearing) Process
While FINRA arbitration involves discovery and various other pre-hearing procedures, the scope and timeline of these procedures are condensed compared to those in securities fraud litigation. The arbitration process prioritizes efficiency while still ensuring that investors are able to obtain the records and information they need to assert their legal rights.
In FINRA arbitration, the arbitration process itself is kept confidential. However, the arbitration panel’s decision becomes public record. In contrast, the litigation process in court is generally public unless one or both parties successfully file to keep the case under seal. Even then, certain matters will still be open to the public. But, if the parties settle, the terms of their settlement will typically be confidential—this is true both in FINRA arbitration and in court.
Duration of the Process
According to FINRA, the average duration of an arbitration case is “a little over a year” when the parties reach a settlement. When arbitration cases go to a hearing, the average time to resolution is 16 months. Securities fraud lawsuits filed in court can have similar timeframes, although they can take much longer to resolve as well. According to research from Stanford University, the typical duration of a securities fraud class action case is three years.
Cost of the Process
Since litigation is more involved and often much longer in duration, seeking damages in court is generally more expensive than pursuing an award in FINRA arbitration. With that said, pursuing a securities fraud lawsuit will still be well worth it in many cases, and investors can work with their counsel to make an informed decision about how best to move forward.
Discuss Your Options with an Attorney at Zamansky LLC
If you believe you are a victim of securities fraud and would like to know about your options, we invite you to get in touch. To schedule a confidential consultation with an attorney at Zamansky LLC, please call 212-742-1414 or request an appointment online today.