In an ideal situation, you would make your investment in the securities business and expect everything to turn out as planned.
However, we live in a world where it is difficult to trust other human beings, especially when it comes to money matters.
That’s why there are regulatory bodies such as FINRA to protect the interest of industry professionals and investors.
Table of Contents
What Is FINRA?
FINRA stands for Financial Industry Regulatory Authority. It is a non-governmental organization whose main objective is to protect the interest of investors. It does this by ensuring that the broker industry runs its affairs in an ethical and fair manner.
It has the authority of Congress to formulate and enforce rules and policies aimed at safeguarding and offering mechanisms of dispute resolution. It is also responsible for punishing anyone found violating those rules and regulations.
FINRA Arbitration
Mediation and arbitration are two major forms of conflict or dispute resolution. Most people use this option instead of resorting to a full-scale litigation process. Mediation basically involves two or more parties negotiating a win-win solution through the help of a mediator.
On the other hand, arbitration is a conflict resolution mechanism where an impartial intermediary is given a chance to listen to both parties and come up with a final decision.
FINRA arbitration consists of a panel of one or more arbitrators chosen by both parties. The decision made by the panel is referred to as an “award.”
The FINRA Arbitration Process
The FINRA arbitration process has several stages together with rules that govern the entire process. Although parties can decide to resolve their dispute before the arbitration has concluded, below is how the process goes from start to finish:
Filing of Acclaim
The FINRA arbitration process kicks off after a claim has been filed. The claim consists of facts and details about the dispute, parties involved, and type of relief being demanded. The person filing the claim can request for interest, actual damages, or any other type of solution.
Claim Answer
After the complainant has met all the requirements, FINRA will serve the Statement of Claim to the other party(ies).
Each party is then allocated a maximum of 45 days to respond to the claim. The response should contain facts and a defense on the claim.
Pre-Hearing Conferences
The first pre-hearing conferences (IPHC) is usually conducted through the phone by the parties involved. The purpose of this meeting is to set timelines for the arbitration process.
It involves deciding the dates for presenting evidence, discovery timelines, briefing deadlines, and other preliminary matters.
Discovery Stage
This is the stage where parties exchange information with each other in order to prepare for the arbitration process.
All parties are supposed to cooperate by providing whatever documents the other party needs. Nonetheless, there’s a provision where a party can object to discovery requests.
Hearings
FINRA arbitration hearings are almost similar to court trials. They consist of submission of facts, closing statements, documents, motions, presentation of evidence, testimonies, and rebuttals of evidence.
During the hearing stage, the complainant is supposed to present all the facts to back up his or her claims. On the other hand, the defendant is given a chance to defend themselves against the claims. Each party can bring witnesses and cross-examine the other side’s witnesses.
Decision and Awards
After the hearings are concluded, the arbitrator examines all the evidence presented. He or she has a maximum of 30 business days to make a decision on whether the person who filed the claim deserves relief or not.
The decision is based on the majority. For example, if the panel comprises three arbitrators, then the two of them must agree with the vote on the same decision.
After that a final decision detailing the type of damages awarded and any other relevant information pertaining to the case will be made.
The amount of time a FINRA arbitration process takes depends on several factors including the number of parties involved, the complexity of the case, discovery timelines, and several other things. However, the average time to conclude an arbitration process is slightly over a year.
Bottom Line
If you are going to file a claim, it is important to hire an experienced FINRA lawyer. This is because securities business laws and regulations are complex and difficult to understand.
