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What Happens in FINRA Arbitration?

June 25, 2021 Blog

For many individual investors, recovering their fraudulent losses involves filing for FINRA arbitration. The Financial Industry Regulatory Authority (FINRA) shares responsibility with the U.S. Securities and Exchange Commission (SEC) for regulating brokers and brokerage firms in the United States, and it provides a forum for investors to pursue fraud claims against their brokers and brokerage firms when warranted. In this article, FINRA attorney Jake Zamansky breaks down what individual investors can expect during the arbitration process.

Recovering Fraudulent Investment Losses Through FINRA Arbitration

There are several steps in FINRA arbitration, and there are also steps individual investors need to take before they can file. These steps include:

1. Determining Your Eligibility

You will need to speak with a FINRA attorney to determine your eligibility. Your attorney will speak with you to understand your situation, review your account history, conduct an investigation and make sure you still have time to file.

2. Filing a Claim with FINRA

If you have suffered fraudulent financial losses, your attorney will file a claim with FINRA. This formally starts the arbitration process, and it starts the clock ticking for your broker’s or brokerage firm’s response. In your claim, your attorney will outline the allegations against your broker or brokerage firm, and your attorney will state how much you are seeking to recover.

3. Waiting for Your Broker’s or Brokerage Firm’s Response

Once you file your claim, your broker or brokerage firm has an obligation to respond. If it fails to do so, this can result in an award being issued in your favor. However, most brokers and brokerage firms respond. In doing so, they will typically dispute their clients’ allegations and argue that their clients’ losses are simply the result of market forces.

4. Selecting an Arbitrator (or Arbitration Panel)

Both you and your broker or brokerage firm will have a say in determining which FINRA arbitrator (or arbitrators) hear your case. Your attorney can assist with this process, and an experienced FINRA attorney will be familiar with the arbitrators who are available.

5. Going Through the Pre-Hearing Procedures

Next, your attorney will need to handle a number of pre-hearing procedures. These include conducting discovery, attending pre-hearing conferences, and submitting arguments to the arbitrator (or arbitration panel).

6. Attending the Arbitration Hearing

Many FINRA arbitration cases settle during the pre-hearing phase. But, if your case does not settle, then you will need to attend a hearing with your attorney. An arbitration hearing is somewhat similar to a trial, although the process is generally much shorter, less formal and more streamlined.  

7. Waiting for the Arbitrator’s (or Arbitration Panel’s) Decision

After the hearing, you will await the arbitrator’s (or arbitration panel’s) decision. If the decision is in your favor, your broker or brokerage firm will be legally obligated to pay the damages awarded. If the decision is not in your favor, you and your attorney will need to discuss the remaining options you have available.

Speak with a FINRA Attorney at Zamansky LLC

If you believe that you may have suffered fraudulent investment losses and would like to speak with a FINRA attorney about filing for  arbitration, we encourage you to get in touch. To schedule a complimentary and confidential consultation at your convenience, please call 212-742-1414 or inquire online today.