The Financial Industry Regulatory Authority (FINRA) operates the biggest securities dispute resolution forum in the country, offering an alternative to traditional court litigation. The arbitration process involves several key steps, each critical for the fair resolution of disputes. These include the following:
- Filing and responding to claims: The claimant files a statement of claim, outlining the dispute’s facts and the relief sought. The respondent then files an answer, addressing the claims.
- Pre-hearing conferences: Arbitrators and parties discuss procedural matters, such as witness lists and hearing dates.
- Discovery: Parties exchange documents and information relevant to the case. This stage is critical for gathering evidence to support each party’s claims or defenses.
The culmination of the arbitration process is the hearing, where both parties present their evidence and arguments. Arbitrators then deliberate and issue a decision, known as an award. The final decision or award is binding and enforceable in court. There is no appeals process at FINRA for these legally binding decisions, but, in some circumstances, a court challenge is possible.
Advantages of FINRA arbitration
FINRA arbitration is typically faster and less expensive than court litigation. The process generally leads to a resolution in just over a year. Arbitrators also have specialized knowledge in securities law, which can lead to more informed decisions. These benefits highlight why FINRA arbitration is a preferred choice for many within the financial services industry.
FINRA arbitration serves as a critical mechanism for resolving disputes within the financial services sector, offering a structured, efficient, and expert-driven process. For first-time participants, understanding the steps involved — from filing claims to the final hearing — can demystify the process and prepare them for what lies ahead. By engaging in this process with a clear understanding of the procedures and advantages, parties can navigate their disputes with greater confidence and efficacy. Whether you are an investor, a broker, or a firm, knowing how FINRA arbitration works better ensures you are able to protect your interests and achieve a fair outcome.
