Securities arbitration is a method of resolving disputes between investors and their brokers or brokerage firms, which is governed by the Financial Industry Regulatory Authority (FINRA). FINRA is a self-regulatory organization that oversees the securities industry and provides a forum for resolving disputes between investors and their brokers or brokerage firms.
Securities arbitration through FINRA is a legal process that allows investors to seek redress for claims arising out of their investment accounts, such as fraud, breach of fiduciary duty, unsuitable investment recommendations, selling away or other misconduct. Securities arbitration is generally faster and less expensive than going to court, and the decision of the arbitrator is final and binding on both parties. It is important for investors to understand their rights and legal options if they believe they have been the victim of misconduct by their broker or brokerage firm.
To initiate a securities arbitration through FINRA, an investor must file a Statement of Claim with FINRA, which sets forth the facts and legal basis for the claim. The Statement of Claim must be filed within six years from the occurrence or event giving rise to the claim. However, the occurrence or event that gives rise to a claim is usually considered the date of damages, or the date a reasonable investor knew or should have known about the claim. While brokerage firms usually argue it is the date of purchase, most arbitration panels disagree with that analysis.