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Life Cycle of a FINRA Claim

Virtually every new account application with any brokerage firm contains a pre-dispute arbitration agreement. This agreement requires that any dispute you have with your stockbroker or brokerage firm be filed with the Financial Industry Regulatory Authority (“FINRA”) instead of being filed in court. The FINRA arbitration process differs from the court system in several key aspects: the case will be decided by 1 or 3 arbitrators instead of a jury; there are no depositions or interrogatories permitted in FINRA arbitrations (with very limited exceptions); FINRA arbitrations are not a matter of public record (the only aspect of FINRA arbitration proceedings that is made public are the awards); and there are extremely limited grounds for appealing a FINRA arbitration award.

The way a FINRA arbitration case generally works is this.

Claimant files the initial document that begins the FINRA arbitration called the Statement of Claim. It identifies the parties, contains the allegations of wrongdoing, and sets forth the amount of damages being claimed. Once it is filed with FINRA, FINRA will serve it on the named Respondent. The Respondent then has forty-five (45) days to file a Statement of Answer.

Within thirty (30) days of the Answer due date, FINRA sends a list of potential arbitrators to the parties on the case. Depending on the amount in dispute, the case is decided by 1 or 3 arbitrators. The parties are given background information on each of the potential arbitrators as well as a list of any prior FINRA awards they have issued. The parties then rank and strike the arbitrators on the list. FINRA will then appoint the arbitration panel based on the parties’ rankings.

Once the arbitrators have been appointed, a conference call is conducted with the arbitrators and the parties’ attorneys to set the schedule for the case. Deadlines will be set for the parties to complete the exchange of discovery and to file any Motions to Compel, if needed. Very few non-discovery related motions are filed in FINRA arbitration proceedings.

Between the scheduling conference and the arbitration hearing, the parties will exchange documents, request documents from third-parties, and may decide to mediate the case in an attempt to settle. Mediation, however, is not mandatory in FINRA proceedings.

If the case does not settle, the arbitration hearing will be held in either the FINRA offices or a hotel conference room. Although the atmosphere is somewhat less formal then in a courtroom, the arbitration proceedings follow a similar pattern – counsel will give opening statements, each side will call witnesses to testify, and closing statements will be made.

The arbitrators will issue the award within thirty (30) business days of the close of the hearing. If the Respondent is ordered to pay any money to the Claimant, it must be paid within thirty (30) calendar days or FINRA will suspend the Respondent’s securities licenses making it impossible for the Respondent to continue doing business until the award is paid. This can be a good incentive for the Respondent to pay the award in a timely manner.

Most FINRA proceedings take around 18 months from start to finish.

If you think your stockbroker or brokerage firm has acted improperly, contact our business litigation attorneys at Rabin Kammerer Johnson to see if you may have a valid FINRA claim. Call 561-659-7878 or Toll Free 877-915-4040.

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