Congress authorized the Financial Industry Regulatory Authority (FINRA) to help protect investors and to ensure that broker-dealers act ethically. One way FINRA attempts to accomplish this goal is through the use of arbitration to help settle disputes.
Arbitration involves the use of an impartial third-party who hears the arguments from both sides. Once each side has presented its case, the arbitrator or arbitrators will issue a binding decision. FINRA arbitration panels consist of one to three arbitrators.
The steps involved in the arbitration process
FINRA arbitration involves several steps:
- A statement of claim: The process begins when one party files a statement of claim. A claim should provide a broad overview of the dispute, name the other parties, and request relief. FINRA will serve the claim on the other named parties.
- Answer: Once service has been made, the other parties have 45 days to respond, or answer, to the claim.
- Arbitrator selection: FINRA will supply each party with a list of available arbitrators. The parties are allowed to select the person or persons they would like to hear their case. Either party may object to the selection of an arbitrator. Any objections must be reasonable.
- Prehearing conference: The prehearing conference will set the dates for hearings, discovery deadlines, and other necessary motions.
- The hearing: The hearing acts much like a courtroom trial. Each side may present evidence. Witnesses can provide testimony. Each party will also have the opportunity to make an opening and closing statement.
The arbitrators will render a decision following the hearing. Arbitrators have 30 days to decide. Remember, the decision is binding. However, there is a limited set of circumstances where it may be possible to challenge a decision.
If you are able to reach a settlement at any point during this process, you may do so.