What to Expect in a FINRA Arbitration Process

Many individuals who invested in the stock market in 2019 experienced unparalleled success and high growth in their portfolio. In fact, the S&P 500 was up 28.9% for 2019.

There were some people, however, who were not so fortunate. Instead of reaping the benefits of the booming market, some sustained losses as a result of poor investment guidance, financial adviser fraud, broker deception, excessive management fees, or other unethical behavior on the part of a financial advisor.

If you, or someone you know, has suffered these types of shortfalls, it is natural to be angry or even embarrassed. After all, you were just trying to improve your life and protect your financial future.

Under these circumstances, you may be able to take legal action against your financial advisor to recover your losses.

Why Choose FINRA Arbitration?

Although you may have the right to face your broker in a formal court hearing, arbitration through the Financial Industry Regulatory Authority (FINRA) may be the alternative to litigation. Sometimes, you may have no other choice but to arbitrate. 

Arbitration is a non-judicial proceeding that is typically faster and lower cost than taking the claim in front of a judge. Specifically, FINRA arbitration allows a person to attempt to recover stock trading losses in a neutral venue where investors present their disputes against their financial advisors.

Some common causes leading investors to enter into FINRA Arbitrations include:

  • Failing to fully disclose the risks of a particular investment 
  • Negligence for bad financial advice
  • Failing to recommend an investment that makes sense for the individual
  • Unauthorized trading and failure to obtain approval from the investor 

Regardless of the situation leading to a FINRA arbitration, taking action against a broker or brokerage firm can quickly become complicated. There are deadlines, documents to be filed, and countless details. 

For these reasons and more, you should not enter FINRA arbitration on your own. It is important to work with a knowledgeable attorney who understands the investment landscape.

How FINRA Arbitration Can Help Investors

FINRA is a government-authorized not-for-profit organization dedicated to protecting investors and is responsible for assuring that securities-related disputes are handled in a truthful, trustworthy, and effective manner.

For investors who have suffered losses from a broker’s misconduct, it may be possible to recover stock trading losses in a process called FINRA arbitration. FINRA is a neutral venue where investors litigate their disputes with their financial advisors.

6 Steps of FINRA Arbitration 

When you have a complaint about an investment dispute with your financial advisor, you should contact an attorney to determine whether you should initiate a FINRA arbitration. This process, however, can quickly become complex and overwhelming. As a result, working with a knowledgeable attorney is important. 

Here are six basic steps of how the FINRA arbitration process unfolds:

  1. Filing: The First Step

The process begins when a Statement of Claim is filed with the FINRA Dispute Resolution department and a filing fee is paid. This Statement includes the facts of the case, the parties involved, and the resolution requested. Fees usually range from $50 to $1,500, depending on the amount in dispute.

  1. Claim Response 

After the filing, FINRA serves the Statement of Claim on the other parties. Each side has 45 days to file a response to the case with the relevant facts and defenses.

  1. Who Hears the Arbitration?

You may wonder if you have any input regarding who decides your case. FINRA uses an unbiased procedure (computer algorithm) to randomly generate a qualified list of potential arbitrators. Typically, a panel is made up of three arbitrators who are knowledgeable in the area of securities such as attorneys, retired judges, and industry professionals. FINRA tries to ensure that there are no conflicts of interest with prospective panelists, such as personal favoritism, current employment by one of the parties, or other issues.

Each side is presented with lists of prospective arbitrators and allowed a limited number of dismissals. The panel is then set and ready to hear the claim. It’s important to understand that FINRA is not there to help the investor, rather, their role is to be impartial.

  1. Sharing of Information

All parties are entitled to “discovery.” Discovery is the sharing of documents prior to the actual arbitration. These include, but not limited to:

  • tax returns for relevant years
  • trading confirmations
  • correspondence, including emails, texts, and more
  1. The Hearing Procedure

The location of the hearing typically takes place where the investor resided when the issue took place. During the hearing phase, the arbitrators listen to opening statements; examination of witnesses, evidence, and closing arguments. 

  1. The Decision and Financial Award

One of the most important aspects of arbitration is that the decisions are final and binding. If damages are awarded, they must be paid within thirty days of receiving written notice, unless the respondent files a motion to appeal. 

Getting Started and Taking the First Step

Understanding the applicable rules, laws and regulations associated with a FINRA arbitration is complicated. To ensure you have the best chance at a favorable outcome, seek the advice and assistance of an attorney to protect your interests.

In legal matters, it is important to speak to a professional familiar with the laws in your state. If you believe that you have a claim against your financial advisor in Missouri or Illinois, call us Ross & Voytas.

Ross & Voytas, LLC are trial lawyers with big firm experience and small firm values. We combine objective advice with the tactical know-how to obtain the compensation you deserve.

The attorneys at Ross & Voytas bring more than thirty years of combined courtroom and litigation experience to support your rights. Clients have given our St. Louis law firm multiple 5-star reviews and we handle difficult cases. 

As natives to St. Louis and licensed in Missouri, Illinois, and various federal courts, Nate Ross and Rick Voytas provide knowledge and personal attention to your legal matter.

Don’t delay! Contact the professional attorneys at Ross & Voytas now for your investment-related legal issues in Missouri and Illinois at 314-394-0605 or learn more at www.rossvoytas.com.

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