What Happens in an Arbitration Proceeding?

Arbitrations are conducted under the auspices of the Financial Industry Regulatory Authority (FINRA). The case is commenced with the filing of a Statement of Claim, which is a complaint that spells out the relevant facts and the remedies sought. You will be designated the “Claimant” and the broker and brokerage firm will be referred to as the “Respondents.” Thereafter, the Respondents will file a written answer in which they’ll deny all of the claims and explain why they were not to blame, usually adding that you were really at fault or are simply not being truthful.

The parties will then exchange document requests. At this point, you’ll be required to produce tax returns and, to the extent you have them, things like correspondence, notes, appointment calendars, and account documents from all past and present investment accounts. Meanwhile, the Respondents will be required to provide lots of documents to us. (Sometimes one or both sides will file motions seeking to compel the other to produce certain documents which have been withheld.)

The parties will select a three-person arbitration panel from lists provided by FINRA. Arbitrators will usually be lawyers, CPAs, or other business types. The Claimant is permitted, but not required, to request that one of the arbitrators be connected to the brokerage industry. (As an aside, we never request an industry arbitrator and, having long fought their mandatory inclusion on every panel, cannot envision a situation in which we would ever request one.) One of the arbitrators will be selected as chairperson and will thereafter be responsible for running the hearings and making certain types of rulings on behalf of the panel.

During this entire period, which will last many months, we will be working up your case by reviewing documents, conferring with expert and fact witnesses, and preparing exhibits. We’ll be handling everything and there will be very little for you to do, though we will keep you apprised of any important developments. Eventually, as we approach the final hearing, we’ll have a number of extensive meetings with you to describe what will happen and to help you prepare to testify.

The hearing sessions will be much like a trial though more informal in nature and not subject to the strict rules followed in court. Hearings usually will be held in a conference room located in a hotel or office building.

After the hearing, the arbitrators have up to thirty days to confer and arrive at a decision. The decision, called an “award,” will be issued to the parties in writing and will likely be final. While there is no appeal from an arbitration award, an award can be vacated in court for certain types of arbitrator misconduct. However, arbitration awards are rarely vacated.

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