Securities Arbitration – The Basics: What you need to know.

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.

After the Statement of Claim is filed, FINRA will provide a copy of the claim to the broker or brokerage firm named in the claim, and the respondent firm will have approximately 60 days to file an Answer to the claim. FINRA will then appoint a panel of arbitrators to hear the case, which will typically consist of either one or three arbitrators, depending on the amount of money in dispute. If the claimed amount is under $100,000 then the case will be heard by one arbitrator and if the claim is for more than $100,000 then the case will be heard by three arbitrators.

The arbitration hearing will typically take place within 12 to 18 months from the filing of the claim, and the parties will have an opportunity to present their evidence and arguments to the arbitrators. After the hearing, the arbitrators will issue an award, which will be final and binding on both parties.

If an investor is successful in a securities arbitration through FINRA, the award may include damages, interest, and attorneys’ fees, damages based on how a well-managed portfolio would have performed, and costs. However, if an investor is unsuccessful, the award will be final and binding, and the investor will not be able to pursue the same claim in court.

In conclusion, securities arbitration through FINRA is an important legal process that provides investors with an efficient means of resolving disputes with their brokers or brokerage firms. If you are an investor who believes that you have been the victim of misconduct by your broker or brokerage firm, you should consult with an experienced securities arbitration attorney to discuss your legal options.

Our law firm, Gana Weinstein LLP, has a great deal of experience in this area. We work exclusively with investors bringing these types of claims. You can reach us at or by phone at 800-810-6242.

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