What To Expect When You File a FINRA Arbitration Claim

Filing a claim for most investors is a walk over a new bridge and involves doing something they have never done before: filing a “lawsuit.” Most people never wanted to have anything to do with the law, but if you lost your life savings, you really do not have much of a choice but to fight to get it back.    The stress you may feel engaging in this process can be mitigated by understanding what lies ahead to prepare yourself mentally, emotionally and physically – by getting your evidence lined up.   Outlined below is the process of filing a claim in arbitration through the final days of trial, which will hopefully bring ease to questions you may have regarding investor arbitrations.

In today’s world, many people invest their money as a way to increase their income.  Some choose to invest on their own, while others use brokers and investment advisors.  As with any job, unfortunately in these professions, bad apples do exist.  Where wrongdoers exist, they cause harm to their clients and to their clients’ investment accounts.  If this happens, clients can sue their broker by filing an arbitration claim within the dispute resolution forum of the Financial Industry Regulatory Authority (FINRA) – the only forum for retail investors to sue brokers and brokerage firms.  The initial claim papers filed details the party or parties that have wronged you, specifies the relevant facts of the events leading up to and causing the harm in your investment account(s), and lists the remedies requested.  When deciding on whether to file an arbitration claim with FINRA, Malecki Law’s FINRA arbitration attorneys can help discuss the merits of your claims and frame them in what is known as a “Statement of Claim,” like a complaint pleading in court.

Once a Statement of Claim arbitration has been filed with FINRA, the party or parties you are suing, also known as the “respondent(s),” have 45 days to file a response, which is called the “Statement of Answer.”  The Answer will typically include relevant facts, supporting documents, and defenses from the perspective of the broker or firm you are suing.  One can anticipate that in the Answer the respondent(s) will try to discredit your claims.  Malecki Law is skilled and very familiar with debunking these typical defenses, as well responding to any creative new tricks.  After reading the Answer, you have the opportunity to amend your Statement of Claim if you feel something should be changed from your originally filed claim.

Once the claim and answer have been filed, a panel of typically three arbitrators (i.e., your “judge and jury”) is selected via a rank-and-strike process which your attorneys will help you with.  Then the discovery process begins.  During the discovery phase of the case, parties typically produce, or hand over, documents which may be relevant to the claims and defenses.  Sometimes this includes the use of experts to determine what documents may be relevant to support your claims.  The discovery process is long and can lead to many arguments between the parties.  Respondent(s), more often than not, will object to producing documents which hurt their position by making arguments such as the documents are not relevant to the claims.  Then you, or rather your counsel on your behalf, will argue why the documents may be relevant.  After arguments, if the parties cannot come to an agreement on what should and should not be produced, then, ultimately, the arbitrators decide on what should be produced after hearing arguments from both sides.

After the discovery process has concluded, the parties will have a better understanding of the facts revolving around the claims.  Although cases can settle and/or be mediated at any point, settlement most typically occurs after discovery has concluded.  Mediation is where the parties agree to have a neutral third party, the “mediator,” facilitate a settlement.  The mediator will talk to each party individually, or counsel on behalf of the parties, to discuss what a fair settlement amount is.  The parties will construct arguments as to why their offer is fair.  Generally, this process takes about a full day.  Neither party is forced to agree to a settlement at the mediation that they do not agree to accept.  Parties can also settle the claims without a mediator.  This involves one party reaching out to the other with a settlement offer.  Typically, there is back and forth between the parties until both parties come to an agreement on a fair offer.  If the parties do not settle the case, then it proceeds to an arbitration hearing (i.e., trial).

The arbitration hearing stage is the final process of the case.  Similar to a court trial, an arbitration is where each side gets to present their case and defenses through witnesses, experts, documents, and arguments.  However, where a court trial may have a judge and jury, the arbitration hearing has an arbitration panel.  The panel typically consists of three arbitrators, who act as judge and jury throughout the hearing, and will ultimately decide the case.  Depending on the case, the arbitration hearing can take hours or weeks.  Because your case is presented through witness testimony, preparation is extraordinarily important to a successful hearing.  This involves preparing with your attorney for many hours each week leading up to the hearing.  About a month after the arbitration hearing has concluded, the arbitrators will publish their ruling on the case in what is called an “award.”  Compared to court judgments, arbitration awards are typically final, as the appeal options in arbitration are very limited, with awards rarely overturned.

The above lays out the general stages of a FINRA arbitration from filing a claim through the hearing.  Of course, each case is unique, and, therefore, what happens in each case is unique.  Although the overall process of FINRA cases remain the same, the strategy to approach each stage is different.  The New York securities fraud lawyers of Malecki law have handled numerous cases of all different variances.  If you believe you have a claim to file against your broker or brokerage firm, feel free to contact us here, and for more information about claims against a brokerage firm or broker please visit our investor page.

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