Stockbroker Arbitration and Mediation Provide Options for Recovering Your Losses Without Going to Court
If you are a victim of stockbroker fraud, every attorney at our stock law firm knows that recovering your investment losses does not necessarily mean going to court. In fact, in the vast majority of cases, aggrieved investors can recover their losses by pursuing arbitration or mediation through the Financial Industry Regulatory Authority (FINRA).
About FINRA Arbitration and Mediation
FINRA shares responsibility with the U.S. Securities and Exchange Commission (SEC) for enforcing stockbrokers’ legal obligations. Under FINRA’s rules, stockbrokers are required to arbitrate disputes with their clients in most cases. If you have invested in the stock market through a broker, your brokerage agreement almost certainly includes a mandatory arbitration provision; and, if it does, this provision is binding on both you and your broker.
Prior to proceeding with arbitration, FINRA’s rules also allow stockbrokers and their clients to agree to mediate. While it won’t always be in investors’ best interests to pursue mediation, this approach can prove beneficial in many cases. Generally speaking, agreeing to mediate does not result in a waiver of your right to pursue other options; so, if mediation is unsuccessful, you can still file for arbitration to secure a binding resolution.
Recovering Fraudulent Losses in Stockbroker Arbitration
Arbitration is the primary option for recovering investment losses due to stockbroker fraud. FINRA arbitration proceedings are governed by the Securities Industry Conference on Arbitration’s Uniform Code of Arbitration and FINRA’s rules. While arbitration is more structured than mediation (more on this below), it is much less structured and less time-consuming than litigating a securities fraud dispute in court.
Pursuing arbitration against your stockbroker begins with filing a Statement of Claim and Uniform Submission Agreement and paying the appropriate fee. Upon receiving notice of your Statement of Claim, your stockbroker has 45 days to respond. From this point forward, both parties’ rights and conduct will be governed by the Code of Arbitration and FINRA’s rules; and, unless you and your broker reach a settlement, the outcome of your claim will be determined by a panel of one to three arbitrators. The panel’s decision is binding—subject to a limited number of grounds for appeal.
FINRA arbitration offers a few key benefits for investors, including:
- Simplified procedures, reduced costs. FINRA arbitration is a relatively streamlined process. With simplified procedures compared to litigation, the costs of pursuing a claim in arbitration can be significantly less than the costs of taking a case to trial.
- Prompt resolution. The simplified procedures of FINRA arbitration also mean that investors can expect quicker results than those attainable in court.
- Knowledgeable arbitrators. FINRA arbitrators are well-versed in the rules and laws that govern stockbrokers’ conduct. This allows them to efficiently arrive at informed decisions in most cases.
However, being forced to arbitrate a claim against your stockbroker can have certain drawbacks as well. Some of the main potential drawbacks of mandatory arbitration include:
- Limited options. While arbitration is an efficient and cost-effective way to resolve most claims against stockbrokers, being forced to arbitrate limits your options.
- Limited grounds for appeal. If you lose your case in arbitration, your grounds for filing an appeal will be limited.
Recovering Fraudulent Losses in Stockbroker Mediation
Even if your brokerage contract includes a mandatory arbitration clause, you and your broker (or brokerage firm) can still agree to mediate your dispute. FINRA handles more than 1,000 mediated claims each year; and, while not all efforts at mediation result in a settlement without arbitration, many do.
Why might you and your stockbroker (or brokerage firm) agree to mediate your dispute? Under appropriate circumstances, mediation offers benefits to both parties. These benefits can include:
- Time savings. If your stockbroker (or brokerage firm) is willing to mediate in good faith, then pursuing mediation can even further reduce the amount of time it takes to achieve a resolution.
- Cost savings. Here too, saving time means saving money. Achieving a negotiated settlement through mediation avoids the additional costs of arbitration.
- More options. In mediation, the parties have the flexibility to develop a mutually agreeable resolution. The mediator’s role is to help the parties explore their options rather than issuing an award in favor of one party or the other.
- More control. Since a mediator does not make a binding decision, pursuing mediation allows disputing parties to retain complete control over the terms of their settlement. If the parties cannot agree, then they can terminate their efforts and move forward with arbitration.
There really aren’t any drawbacks to mediation. Even if mediation does not result in a settlement, it can help set the stage for arbitration. However, mediation will not make sense in all cases, and, if your broker (or brokerage firm) is not willing to mediate in good faith, then it can end up being a waste of time.
Should You Pursue Stockbroker Arbitration or Mediation?
Should you pursue stockbroker arbitration or mediation? If you believe that you are a victim of stockbroker fraud, you should discuss your options with an attorney. Arbitration and mediation may both be good options—and they may be your only options if your brokerage agreement includes a mandatory arbitration clause. At Zamansky LLC, a stock law firm, our stockbroker fraud lawyers will thoroughly evaluate your claim, we will communicate with your stockbroker’s (or brokerage firm’s) lawyers if mediation seems like it might be a good option, and we will help you make informed decisions about how to pursue recovery of your fraudulent investment losses.
Speak With an Attorney at Our Stock Law Firm
If you have suffered fraudulent investment losses and need to pursue a claim against your stockbroker, we can help. Our stock lawyers have decades of experience recovering financial compensation for aggrieved investors through FINRA arbitration and mediation. For a free and confidential consultation about your options, call our stock law firm at 212-742-1414 or tell us how we can reach you online now.