FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator of all United States securities firms. FINRA’s mission is to ensure honesty and fairness in the securities industry, thus protecting America’s investors. Additionally, FINRA operates one of the largest forums for the resolution of disputes between brokerage firms or individual brokers and their investment clients.
Typically, brokerage companies require their customers to enter into a contractual agreement as part of opening a new customer brokerage account. Most contractual agreements include a provision pertaining to FINRA arbitration. Typically under this agreement, if a client intends to take legal action against a broker for stockbroker misconduct or fraud, they must use the FINRA arbitration process rather than a lawsuit or judicial proceeding in a state or federal court.
In general, the FINRA arbitration process involves the following steps:
Arbitration Process is Started
The investor’s lawyer files a Statement of Claim with FINRA. The party who files the Statement of Claim is called a claimant. The claimant must also file a Submission Agreement and pay the appropriate filing fees. Once the claimant has filed the appropriate forms and has met the filing requirements, FINRA will then serve the Statement of Claim on the stockbroker named in the claim (known as the respondent).
The Respondent Answers the Claim
The respondent then files an answer to the claim, which usually denies responsibility for the conduct and losses described in the claim. The respondent is required to respond to the Statement of Claim within 45 days with a written filing that provides the relevant facts and available defenses to the claim.
The Arbitrator is Selected
The attorneys for both the claimant and the respondent receive a list of potential arbitrators. Both sides have an opportunity to eliminate potential arbitrators from the list and then rank the remaining potential arbitrator candidates. Counsel for both sides confidentially submit their revised and ranked lists to FINRA, who reviews the lists and compiles the arbitration panel by choosing the three highest ranked arbitrators. FINRA then sets the prehearing conference.
The Evidence is Exchanged and Reviewed
Both sides now participate in a “discovery of the evidence” where each side exchanges relevant records that may be used at the hearing. Twenty days prior to the arbitration hearing, the parties exchange their list of witnesses and exhibits they will be using at the hearing.
The Arbitration Hearing is Held
The hearing location is typically selected by FINRA and will typically be at a neutral place, such as a hotel, conference center or even a local FINRA office.
The Verdict is Announced
The FINRA arbitration panel closes the hearing and will then meet to decide on the evidence and information they have heard. The arbitration panel will then issue a written decision outlining the award. If the panel awards the claimant money, the respondent has thirty days to pay the claimant.
If you suspect stockbroker misconduct or have suffered a loss from excessive fees, trades, or inappropriately risky investments you may be able to initiate a FINRA arbitration process to take legal action against your stockbroker. Contact the legal team of Landskroner Grieco and Merriman, LLC to have your case reviewed free of charge. The experienced legal team of Landskroner Grieco and Merriman, LLC works aggressively for the victims of stockbroker misconduct. Call Team LGM for a consultation today at 216-522-9000 or toll free at 1-866-522-9500.