Here are some of the more frequently asked questions:
- Why Arbitration?
- Where is the Case Arbitrated?
- Does a Case Usually Go to Hearing or is It Settled?
- How Does One Commence an Arbitration Proceeding?
- What Sort of Documents are Involved with Discovery?
- What is the Success Rate for any Claim?
- Do I Need an Attorney for FINRA Arbitration?
- How Does the Firm Set Its Fee?
A: Stockbroker claims are decided at arbitration rather than court. All brokerages require their customers to sign an agreement agreeing to arbitration. That process is more economic to investors because the cost of court is much more expensive and takes much longer.
Q: Where is the Case Arbitrated?
A: Cases against broker dealers are almost always arbitrated before the Financial Institutions Regulatory Authority (FINRA). The location of the arbitration is almost always a FINRA location closest to the customer’s home. American Arbitration Association Arbitration proceeding are also almost always closest to the customer.
Q: Does a Case Usually Go to Hearing or is It Settled?
A: Most cases are settled. Otherwise, the cases go to hearing before a Panel of Arbitrators. There are usually three (3) arbitrators. In the event of a case which involves less than $25,000, one arbitrator is involved.
Arbitration generally does not involve depositions or appeals. The usual length of the case varies from 12 to 16 months.
Q: How Does One Commence an Arbitration Proceeding?
A: The investor, acting through his/her attorney commences the case through filing of a “Statement of Claim.” This is like a court complaint. It is filed with FINRA or the American Arbitration Association. The Statement of Claim is a summary of what the broker did wrong in accordance with applicable law. The Statement then demands damages. The Statement must state a cognizable claim for recovery.
The defending broker or investment advisor then files an Answer.
FINRA then distributes lists of potential arbitrators. Bias and other factors are then evaluated by the Claimant’s attorney to Object to the appointment of any specific arbitrator.
Thereafter, each of the customer’s attorney and the defending brokerage transmit Discovery Demands which must be responded to.
Q. What Sort of Documents are Involved with Discovery?
A: There is a specific list of documents including, but not limited to, all account statements in the possession of the broker and customer, all correspondence, three years of tax returns, information related to any accountant or advisor used by the customer, and even many times a list of what magazines and newspapers are read by the customer.
Q: What is the Success Rate for any Claim?
A: This depends on the case and chance. There is no way to evaluate fully all of the factors in each case until discovery is complete. An effective attorney will advise of the risks prior to going to Hearing. Most cases are settled for this reason.
Q: Do I Need an Attorney for FINRA Arbitration?
A: FINRA Arbitration sets forth many Rules and an individual investor may not be aware of as to principally “what a broker did wrong.” Most issues can involve more complicated issues of law like “churning ratios”, “unauthorized trading” and similarly, which only an attorney is trained to interpret. The process also requires experience in obtaining documents for discovery, retaining experts and conduct of the Hearing. Not having an attorney means that the Investor will be at a disadvantage when confronting highly hourly paid attorneys representing brokerages and insurance carriers.
Q: How Does the Firm Set Its Fee?
A: We work on a contingency fee of 33 1/3%, rising to 40% shortly before the arbitration hearing if the case goes to trial. If you recover nothing, you pay no legal fees.
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