Understanding The Law: Finra Arbitration And You

FINRA arbitration is a process that allows for the resolution of disputes between parties, similar to going to court but faster, cheaper, and less complex. It involves seven stages, from the claimant filing a claim and the respondent submitting an answer, to selecting arbitrators, attending prehearing conferences, exchanging discovery, attending hearings, and finally, the arbitrators deliberating and rendering an award. FINRA provides a list of possible arbitrators for each case, and both sides can remove or rank them. Arbitrators must remain neutral and make decisions based on the facts and merits of the cases. The arbitration award is legally binding and final unless challenged in court. FINRA arbitration has specific rules and procedures, including time limits for submitting claims and eligibility requirements, and it offers a Dispute Resolution Portal for case participants to view case information and submit documents.

Time limits on claims

When it comes to time limits on claims, FINRA has specific rules in place. According to Rule 12206 for Customer Disputes and Rule 13206 for Industry Disputes, there is a six-year time limit for submitting a claim to arbitration. This means that a claim must be filed within six years of the occurrence or event that gave rise to the cause of action. It is important to note that this time limit is not a statute of limitations and can be shorter than six years. If a respondent raises a shorter statute of limitations as a defence, the claim may be subject to that shorter time frame.

The six-year time limit is important to consider when submitting a claim to FINRA arbitration. If this time limit has passed, the claim may not be eligible for submission. However, it is worth noting that filing a claim in court will toll the six-year time limitation, meaning that the time the court has jurisdiction over the matter will not count towards the six-year limit. Additionally, if a claim is directed to arbitration by a court, the six-year time limit will not apply.

To initiate the arbitration process, a Statement of Claim must be filed. This can be done through the DR Portal, or by filing it with the New York Office of FINRA Dispute Resolution Services. Once the Statement of Claim is received, the case will be assigned to a regional office and a case number will be provided. This case number should be referenced in any communication or inquiries about the case.

It is important to act promptly when it comes to filing a claim to avoid losing the right to seek a remedy or recover funds. While the six-year time limit is a general guideline, specific statutes of limitations may apply depending on the nature of the case. Therefore, it is recommended to consult an attorney to understand the time restrictions that may apply and to discuss your rights and remedies.

Applicable laws and codes

The FINRA arbitration process is governed by a comprehensive set of laws and codes that outline the rights and responsibilities of the parties involved. These laws and codes are designed to ensure a fair and efficient resolution process for all parties, including customers, industry professionals, and FINRA members.

One of the key documents is the Code of Arbitration Procedure, which has separate versions for customer disputes and industry disputes. This code sets out the rules and procedures that must be followed during the arbitration process, including the filing and serving of documents, the selection of arbitrators, the exchange of information, and the conduct of hearings. It also covers the fees associated with the arbitration process and the time limits for submitting claims, which is generally six years from the occurrence of the event giving rise to the claim.

Another important aspect of the applicable laws and codes is the requirement for predispute arbitration agreements. These agreements are highlighted within the customer account agreements and outline the terms and conditions that customers agree to when signing up for FINRA-regulated services. The agreements include provisions such as the waiver of the right to sue in court, the finality and binding nature of arbitration awards, and the limitations on obtaining documents and witness statements.

FINRA also provides a range of resources and guidelines to assist in the arbitration process, including scripts, templates, forms, and guides. These resources are designed to help parties navigate the process effectively and ensure compliance with the relevant laws and codes.

Furthermore, FINRA's arbitration process is subject to various regulatory notices and amendments that are released from time to time. These notices provide updates and clarifications on the rules and procedures, ensuring that the arbitration process remains fair, transparent, and up-to-date with any changes in the industry or legal landscape.

Overall, the applicable laws and codes that govern FINRA arbitration are comprehensive and detailed, providing a clear framework for the resolution of disputes. By adhering to these laws and codes, FINRA strives to create a balanced and efficient process that protects the rights of all involved parties.

Arbitrator selection

Both sides can then remove, or strike, some of the arbitrators from the list and rank the remaining names in order of preference. This process ensures that both parties have a say in the selection of the arbitrators. FINRA requires that, for smaller claims involving customers, a public arbitrator serves as the sole arbitrator. For larger customer claims, a three-arbitrator panel is convened, with customers having the option to choose an all-public arbitration panel or a majority-public panel. Disputes between firms, on the other hand, are decided exclusively by non-public arbitrators.

FINRA's arbitrator selection process aims to include individuals from diverse professions and backgrounds, ensuring a fair and impartial decision-making process. Arbitrators are not employees of FINRA but work as independent contractors on a case-by-case basis. They must meet certain qualifications, including educational and professional requirements, and undergo mandatory training.

The number of arbitrators on the panel depends on the amount in controversy. For claims of up to $50,000, a single arbitrator presides. For claims between $50,000 and $100,000, one arbitrator is also appointed, unless the parties agree in writing to have three arbitrators. When the claim exceeds $100,000, or if the claim is unspecified or non-monetary, a panel of three arbitrators is typically appointed, unless the parties agree in writing to a single arbitrator.

Prehearing procedures

Prehearing conferences are an important part of the FINRA arbitration process, serving to expedite the proceeding, establish efficient procedures, and improve the quality of the hearing. These conferences are typically held via video conference or telephone, with the parties usually being represented by an attorney. Here are the key steps and considerations for the prehearing procedures:

Initial Prehearing Conference:

The initial prehearing conference is held once the arbitrator selection is concluded. This conference is attended by the parties and arbitrators and is often facilitated through a video call. During this conference, the focus is on setting a schedule for the case, including:

• Briefing and motion deadlines.
• Witness lists and subpoenas.
• Stipulations of fact.
• Unresolved scheduling issues.
• Contested issues that will be addressed through briefs.
• Any other matters that will simplify or expedite the arbitration.

Additional Prehearing Conferences:

In some cases, additional prehearing conferences may be necessary to address outstanding preliminary matters. These can be scheduled upon the joint request of the parties or at the discretion of the Director, who sets the time and place. The panel may also schedule additional conferences to address specific issues, such as discovery disputes, witness lists, stipulations of fact, and any other matters that will aid in the efficient management of the proceeding.

Prehearing Order:

At the conclusion of any prehearing conference, the Hearing Officer enters a written ruling or order. This document recites any agreements reached and outlines procedural determinations made by the Hearing Officer. It is an important record of the decisions and directions set during the prehearing stage.

Failure to Appear:

It is crucial for parties to attend the prehearing conferences. If a party fails to appear, in person or through counsel or a representative, the Hearing Officer may issue a default decision against them. This decision is made if the party had due notice of the prehearing conference.

Discovery:

The discovery stage is a critical aspect of the prehearing process. During this stage, parties request and exchange documents and information to prepare their cases for the arbitration hearing. FINRA's website provides detailed rules for parties to follow during discovery, and the Discovery Guide outlines the specific documents that should be exchanged in customer cases. Parties must cooperate during discovery and may face sanctions for non-compliance. The Code of Arbitration Procedure also allows for objecting to discovery requests.

Hearing procedures

FINRA offers 69 hearing venues across the United States, with at least one in each state, as well as in San Juan, Puerto Rico, and Washington, D.C. The location of the hearing is usually the FINRA hearing venue nearest to where the claimant lived at the time of the original dispute. However, if the parties agree on an alternative venue, FINRA will try to accommodate the request.

The hearing will typically be held in-person, but it can also be conducted via video conference or telephone. The hearing is conducted in English, but interpretation services are available upon request. If a party is experiencing financial difficulties, they can submit a request for a waiver of interpretation service fees no later than 60 days before the hearing.

The hearing will begin with the arbitrators, claimants, respondents, and their respective counsel and witnesses entering the hearing room. The chairperson will then call the hearing to order, with all participants identifying themselves. The parties and witnesses will then be sworn in.

The claimant's side will have the opportunity to make an opening statement, followed by the respondent's side. These statements should outline the issues and what each party intends to prove, without presenting evidence.

After the opening statements, the claimants will present their case, including witnesses and relevant documents. The other side can cross-examine the witnesses, and the arbitrators may also ask questions. Once the claimants have completed their presentation, the respondents will follow the same procedure.

Each party can object to any evidence presented, and the arbitrators will decide whether to accept it. The hearing is digitally recorded, usually by the arbitrators, and parties may request a copy of the recording. If a party wishes to have a transcript as the official record or have a stenographer present, they must receive permission from the panel and will be responsible for any costs unless otherwise assessed by the panel.

Once all witnesses and evidence have been presented, the parties will present their closing arguments, summarising what they believe they have proven. Each side can then rebut the other's closing arguments if they wish.

The hearing is followed by deliberations, after which the arbitrators will deliver their decision, known as the "award". This decision is binding and final unless challenged in court.

Frequently asked questions