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Securities Arbitration

When people are involved in a legal dispute, going to court isn’t the only option. In many cases, arbitration is the better choice. Arbitration is a way to settle disputes with an independent third party.

The benefit of arbitration over court is that resolutions are generally faster and less expensive. When two parties decide to go through arbitration, they forgo the right go to court. In addition, the ability to appeal a decision is limited.

FINRA Securities Arbitration

Investors who utilize registered brokers and financial advisors have a specific type of arbitration overseen by the Financial Industry Regulatory Authority (FINRA). Through the FINRA arbitration process, investors can resolve disputes with securities advisors and brokerage firms. Though it doesn’t take place in a court, parties can, and should, get legal guidance from attorneys.

FINRA is a nonprofit organization authorized by Congress, though it is not a government agency. Its goal is to regulate the securities industry and offer protection for investors. FINRA attempts to do this by enforcing rules that brokers and brokerage firms are required to follow. All brokerage firms use a FINRA arbitration clause in their customer agreement and the Supreme Court has found securities arbitration to be a fair method to resolve disputes.

How FINRA Securities Arbitration Works

The FINRA arbitration process begins when a claimant – such as an investor – files a Statement of Claim with FINRA, either online or through the mail, and pays the appropriate fees. The Statement of Claim consists of three elements:

  • A description of the dispute
  • All of the parties involved
  • The amount of money being sought

To support the claim, it is important to provide all relevant documents. The claimant must also submit a Submission Agreement, which lists the parties in the case. This document also confirms that:

  • FINRA will be the administrator
  • The case will end with a hearing
  • The parties agree to abide by the decision of the arbitrator

When the necessary documents are filed by the claimant, the Statement of Claim is served by FINRA on the other parties involved, who are known as the respondents. FINRA also examines the claim to figure out the nature of the dispute, the types of securities involved, and how many arbitrators will be needed.

Other important considerations during securities arbitration

If six years have passed since the event(s) that spurred the claim, it may be ineligible for FINRA arbitration. In addition, during arbitration, no party may bring a suit or legal action against any other party that would resolve any matters raised in arbitration. Class action disputes are not eligible for arbitration through FINRA.

Filing a FINRA claim? Help is available

Arbitration isn’t quite as lengthy, costly, and complicated as a court case, but there are still many legal components that can be difficult to understand. This is why it’s a good idea to utilize an experienced securities arbitration attorney. If you need help with your claim, get in touch with the Silver Law Group. Our firm works on a contingency-fee basis, which means we are not compensated unless you recover funds.

Scott Silver has represented investors and others in over 1,000 FINRA arbitration claims over more than 20 years as an attorney practicing in the area of securities and investment fraud. In addition to contributing to other publications, Scott wrote a securities arbitration primer for Trial Magazine which can be viewed here.



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