Arbitration is a form of alternative dispute resolution that can help navigate Financial Industry Regulatory Authority (FINRA) claims. This process can be beneficial to those who have disagreements in this area and is often faster and less costly than traditional litigation.
How can brokers use arbitration to their advantage?
Brokers can use arbitration to help resolve disputes with their firm. For instance, arbitration can help those seeking to secure deferred compensation for their firm.
Deferred compensation refers to earnings that are set aside for future payment, often tied to performance or tenure. Brokers may have deferred compensation arrangements based on vesting schedules, bonuses, or other contractual terms. Unfortunately, firms may not always meet their obligations.
When disputes arise between brokers and their firms regarding deferred compensation, FINRA arbitration may provide a viable forum for resolution.
How does the arbitration process work?
Although the details vary for each dispute, the process generally begins with filing a claim with FINRA. This paperwork will include information about the dispute, the parties involved, and the amount of deferred compensation sought.
In a case where the broker is filing against a firm, the firm will then respond to the claim. Brokers and the firm will move forward, choosing neutral arbitrators who will preside over the case. A prehearing conference is generally scheduled to discuss procedural matters and set timelines before moving on to discovery and evidence exchange where the brokers and the firm exchange relevant documents.
Brokers will present their case, supported by evidence. Arbitrators will listen, assess credibility, weigh arguments, and ultimately issue a binding decision.
What are some examples of brokers using arbitration for deferred compensation?
There are multiple examples of brokers using arbitration to help enforce agreements with their firms regarding deferred compensation. Some recent examples include:
- Morgan Stanley: The most recent example, a FINRA arbitration panel recently ordered the global financial services firm to pay former advisors more than $1 million for failing to pay deferred compensation.
- Credit Suisse: In another example, arbitrators ruled in favor of brokers who were owed more than $6 million in deferred compensation, damages, and attorneys’ fees.
These examples show that FINRA arbitration can provide brokers a venue to secure their rightful deferred compensation.
