When individual investors find themselves in a dispute with their broker or brokerage firm, pursuing FINRA arbitration is one option for resolving the dispute and securing compensation for financial losses. FINRA arbitration represents an efficient means of seeking financial recovery and justice after suffering losses from broker fraud or misconduct. But to give yourself the best chance of success, you need a highly skilled Florida FINRA arbitration lawyer.
For more than two decades, the attorneys at Erez Law, PLLC, have successfully advocated on behalf of victims of securities and broker fraud. Investors from across Florida, around the United States, and throughout the world trust our firm’s extensive experience and exclusive focus on securities and broker fraud cases. Our firm takes pride in our track record of successful results for our clients, totaling more than $175 million in compensation.
If you are considering pursuing FINRA arbitration after losing money due to fraud or misconduct by your stockbroker or brokerage firm, reach out to the Florida FINRA arbitration lawyers at Erez Law, PLLC, for a free case evaluation. We work with clients in Miami, Tampa, Jacksonville, Orlando, and throughout the state.
What Is FINRA?
FINRA, or the Financial Industry Regulatory Authority, is a non-governmental, non-profit, self-regulatory industry association. Congress has authorized FINRA to create and enforce rules and codes of conduct for broker-dealers, investment firms, and other financial institutions that have a membership with FINRA.
While FINRA is an association of financial institutions, its mission is to protect financial markets and investors by ensuring that broker-dealers act responsibly and honestly with their clients and the investing public. In addition to monitoring market activity for signs of improper or unethical conduct, FINRA conducts investigations into suspected broker fraud or misconduct or investor complaints against broker-dealers. FINRA also offers investors and broker-dealers mechanisms to resolve disputes arising from alleged misconduct, including mediation and arbitration services.
Why FINRA Matters
Like most individual investors, you likely depend upon information and advice from your broker or advisor to make sound, informed choices when it comes to managing your investments. To be successful, you need to know that you can trust your broker, as well as the larger firm he or she works for, and you also need to be able to trust the companies that offer investments and securities to individuals.
FINRA understands how important the trust among individual investors, financial professionals, and larger firms, companies, and banks is to the financial industry. They utilize a variety of tools to protect investors from unethical practices by brokers, financial advisors, and firms. In its work, FINRA protects not only individual investors but also the integrity of the market as a whole.
What FINRA Does
FINRA works to achieve its goals in several ways. It sets rules that require brokers to be licensed and undergo testing, and it requires truth in advertising for investments. FINRA also helps to ensure that the securities sold on the market are suitable for individual investors, which is important, as some investors’ situations allow them to take on risky ventures, while other investors have lower thresholds for risk. FINRA also works to make certain that investors have ready access to all the information about the market they need to make an informed decision before they invest.
FINRA’s current oversight encompasses over 600,000 brokers and almost 4,000 firms nationwide. The organization assessed over $95 million in fines last year and secured payment to harmed investors in the amount of almost $150 Million.
Understanding the FINRA Arbitration Process
Arbitration refers to a dispute resolution process that serves as an alternative to filing a lawsuit in court and going to trial. To many people, arbitration can feel like a court proceeding or trial. However, arbitration is typically faster, less complex, and less expensive than litigation in court.
In a FINRA arbitration cases, the parties to a dispute select a neutral third party called an arbitrator to review the evidence and arguments presented by the parties and issue a final, binding decision resolving the dispute. The parties give up their right to have their dispute heard and decided by a court by going to arbitration.
Since arbitration decisions are binding on the parties, a court can only overturn a decision under limited circumstances, such as one of the parties engaging in fraud during the arbitration process or the arbitrator issuing an award outside the scope of the dispute.
FINRA arbitration can take one of three primary forms depending on the monetary size of the claim:
- Claims involving more than $100,000 must be resolved in an in-person hearing before a panel of three arbitrators, with one arbitrator serving as the chairperson for the arbitration proceeding.
- Claims of $100,000 or less are heard in an in-person hearing with a single arbitrator.
- For claims of up to $50,000, the parties have the option of waiving the in-person hearing and having the single arbitrator decide the case by reviewing documents and legal briefs submitted by the parties.
The arbitration process begins when a party to a dispute files a FINRA statement of claim. The statement sets forth the alleged facts of the dispute, the parties involved, and the relief sought by the claimant. The statement must be accompanied by a Submission Agreement and the appropriate filing fees. If FINRA accepts the filing, it will send the statement of claim to the opposing parties, who have 45 days to file a response setting forth their version of the facts and the defenses they wish to raise.
The parties then must select an arbitrator or an arbitration panel from a list of arbitrators randomly generated by computer. Both sides must agree to each arbitrator’s choice and may object to an arbitrator on grounds such as conflict of interest, personal bias, or lack of subject matter expertise.
Once the arbitrator or panel is selected, they will hold prehearing conferences to set arbitration deadlines and resolve preliminary issues. During this time, the parties will also engage in the discovery process, in which they can request documents and information from one another. Parties are required to fulfill all reasonable discovery requests but may object if they believe a request seeks irrelevant information or requires overly burdensome effort to respond to.
Eventually, the arbitration will proceed to a formal hearing, which functions much like a trial. Each party will have the opportunity to present its arguments, evidence, and testimony and have its evidence and witnesses cross-examined by the other side. Once both sides present the evidence they want in the record, the arbitrator(s) will consider the evidence and render a decision. Arbitration panels reach decisions by majority vote.
Our nationally recognized securities attorneys have extensive knowledge of the FINRA arbitrator requirements as well as the FINRA arbitration rules. We can help you navigate this complex process and fight for fair recovery of your investment losses.
Common FINRA arbitration claims include:
- Churning. This is when a broker “churns” up commissions by trading excessively and unnecessarily through an investor’s account.
- Lack of diversification. This is when a broker fails to advise, either through thoughtlessness or blatant misconduct, an investor to appropriately diversify his or her investment portfolio, resulting in significant losses.
- Misrepresentation. Misrepresentation can take a variety of forms in the securities industry, but it generally involves brokers or financial advisors failing in some way to fully inform their clients about the risks or advantages of a particular investment opportunity.
- Negligence. Brokers may also provide investors with bad advice not through fraud or blatant misconduct, but because they themselves are not well informed about the industry. This constitutes negligence, and even though it’s not intentional, finance professionals still need to be held accountable.
- Unauthorized trading. This is when a broker makes trades, purchases, or sales on an investor’s account without his or her knowledge, through a non-discretionary account.
- Unsuitable investments. Your financial advisor has a professional obligation to direct you toward investments that are suitable for your individual needs and goals. Brokers and advisors can have claims filed against them for advising clients to take on unsuitable investment opportunities.
- Violating securities law. Obviously, if a financial advisor or brokerage firm knowingly violates the law, not only will FINRA arbitration likely take place, but the district attorney can file criminal charges against them as well.
- Breach of Fiduciary Duty. Under certain circumstances, or under State law, brokers may owe customers a fiduciary duty. A fiduciary duty means that brokers must place their client’s interest before their own, including full and fair disclosure, among other ongoing duties.
Why You Need an Experienced Florida FINRA Arbitration Lawyer
Although you are not required to have an attorney in a FINRA arbitration, you should not try to pursue arbitration on your own. Securities laws and regulations represent some of the most complex areas of law. At Erez Law, PLLC, our FINRA arbitration law firm has spent decades successfully handling cases involving securities or stockbroker fraud claims. An experienced Florida FINRA arbitration lawyer from our firm can help in your case by:
- Thoroughly investigating your case’s underlying facts and circumstances to recover evidence we can use to build compelling, persuasive arguments on your behalf for arbitration
- Explaining your legal rights and options, including options for pursuing investor complaints, seeking FINRA arbitration or pursuing mediation during the proceedings, or going to court
- Documenting the full extent of your financial losses and consulting with you regarding what other relief you need
- Preparing and filing your arbitration claim and handling the details of prehearing conferences and discovery during the arbitration process
- Negotiating on your behalf to try to reach a fair and full settlement if you choose to pursue mediation
- Arguing your FINRA case at the arbitration hearing
What Is the Difference Between FINRA Arbitration and Mediation?
In addition to arbitration, FINRA offers investors who have disputes with brokers the option of resolving their dispute through mediation. While FINRA arbitration involves a trial-like process where a third party resolves the dispute, rendering a decision binding on the parties, mediation instead functions more like a settlement negotiation.
Rather than having the parties negotiate a settlement on their own, in mediation, the negotiations are facilitated by a neutral party known as a mediator. The mediator, who usually has extensive knowledge in the specific subject matter of the dispute, works to help both sides understand the strengths and weaknesses of their cases and try to find a mutually acceptable resolution.
FINRA mediation can be provided to parties who have already engaged in the FINRA arbitration process. FINRA mediation may be initiated at any time before the conclusion of the arbitration hearing. Both parties must agree to participate in mediation.
Since the parties must voluntarily choose to participate in mediation, either party can walk away from the mediation at any time. However, according to FINRA, over 80 percent of all cases where the parties choose to try mediation result in a settlement, eliminating the need to continue the arbitration process.
Filing an Investor Complaint vs. Arbitration Case
With FINRA, filing an investor complaint triggers an entirely different process than filing for arbitration. A FINRA arbitration resolves monetary disputes between an investor and a broker-dealer, brokerage firm, or other financial institution that is a member in FINRA. In other words, arbitration allows an investor to recover compensation for losses that they sustained due to a broker’s fraudulent actions, omissions, or other misconduct.
Conversely, an investor complaint represents the avenue by which an investor can alert FINRA to suspected fraudulent activity or misconduct by a member broker or firm. After receiving a complaint, FINRA will investigate the allegations. If the investigation substantiates the allegations in the complaint, FINRA can impose sanctions on the at-fault party or parties. These sanctions include monetary fines or suspension or expulsion from the securities industry. However, an investor complaint cannot help investors recover money for losses they suffered due to FINRA fraud.
How Long Do You Have to File a FINRA Claim?
Given the complex nature of FINRA regulations and federal and state statutes of limitations, you need to speak to a knowledgeable Florida FINRA lawyer as soon as possible. Your attorney can explain which time limits apply in your case and begin working on your claim immediately.
What Can You Recover in FINRA Arbitration?
If you prevail in a FINRA arbitration, you may be entitled to recover compensation for expenses and losses that you incurred due to a broker-dealer or firm’s fraud or misconduct. This may include:
- The fees you paid to the broker or firm for services that involved fraudulent behavior or misconduct
- The loss of value in investments attributable to broker fraud or misconduct
- Other expenses and losses you incurred, such as tax liability
- Reimbursement of your legal fees and costs you incurred in pursuing arbitration
Along with a financial recovery, you may be entitled to demand other forms of relief, such as specific performance of contractual obligations to you.
Talk to a Florida FINRA Arbitration Attorney Now
If you have suffered financial loss due to fraud or misconduct by a broker-dealer or brokerage institution, contact Erez Law, PLLC, today for a free, no-obligation consultation with a Florida FINRA attorney. We can help you understand your legal rights and options for pursuing accountability and compensation through a FINRA arbitration, as well as other avenues you may have to hold a broker or brokerage firm responsible for their conduct and your losses.