How Do I Sue My Broker Through FINRA Arbitration for Investment Loss?

Many investors are unaware they cannot sue their financial advisor or stockbroker in court if there is a dispute. This does not mean that an investor cannot seek redress. Investors can sue their stockbroker, but only through the FINRA arbitration system.

What Are Arbitration Clauses, and Why do Investors Need to Know Them?

With any brokerage firm, there are "arbitration clauses.” Unfortunately, most investors do not know about these clauses as they are buried in all new account forms. These clauses are contractual, and when you sign a new account form, electronically or physically, you enter into a contract that MANDATES all disputes be resolved via FINRA arbitration. Abundant case law protects arbitration clauses.

In short, you cannot get out of them. Judges love them as it clears their docket. Supreme Court has ruled that arbitration is just as fair to the consumer as a court. It should be noted that there is a very, very limited right of appeal. Arbitration is binding and, in almost all cases, final! Many investors are mistaken that arbitration is just a step; after it is complete, it's off to court. However, this is not the case.

What is the Process of Filing a FINRA Arbitration?  Step One: Hiring A Specialist Attorney 

Filing a FINRA arbitration is much like filing a case in State or Federal court. It’s best to hire a seasoned investment attorney to navigate you through the process, such as The Team at SSEK.

It is beneficial if the attorney exclusively focuses on representing investors against brokerage firms. An investment attorney that does personal injury or class actions is less preferred for this cause. Not that there's anything wrong with securities lawyers specializing in those fields. It is favorable to seek an investment attorney specialist in his field.

Moreover, your FINRA attorney should have over decades of experience in FINRA arbitration, and the law firm should have been around longer. Your attorney should focus exclusively on representing investors against FINRA brokerage firms. Shockingly, some attorneys represent both investors and brokerage firms, which is not encouraged.

Step Two: Filing Your Claim With FINRA

Once you hire your FINRA attorney specialist or securities lawyer, the next step is officially filing the claim with FINRA. Your investment attorney would have reviewed your documents and conducted the client interview or conducted similar things prior to taking your case on contingency. A seasoned investment attorney ensures a light at the end of the tunnel for the lawyer and the client.

The filing process with FINRA may appear simple, but it can be deceiving. The first document an investor, or Claimant, must file to start the arbitration process is the Statement of Claim. This document or pleading filed with FINRA states the facts and allegations that are being stated.

Drafting this document requires skill, experience, and nuance. It's similar to what one would file in State and Federal court. However, the filing cannot be like those filed in court. An experienced FINRA attorney creates an optimum impact on the arbitrators.

It is essential to understand that the arbitration panel is typically composed of three arbitrators. It’s important to know that an arbitration hearing is similar to a traditional trial. In the trial, there is a judge, who rules on the law, and the jury determines issues of fact. In an arbitration hearing, the arbitrators act as both judge and jury, ruling on legal issues and determining the facts. Your FINRA attorney must know how to play to that specific audience as it differs from the judge/jury trial setting.

Step Three: Waiting on the Brokerage Firm’s Response

After the case is officially filed, the brokerage firm gets to respond with its "Answer," which is usually filled with inaccuracies, distortions, and falsehoods, if not lies. Many clients have been shocked by the positions taken by the financial advisor that was once considered a friend. The brokerage firms generally hire highly trained investment attorneys skilled in their craft. This skill includes the ability to twist the fact patterns and lay blame on the investor.

Step Four: Choosing the FINRA Arbitrators 

Following the Answer, the next step is choosing the arbitrators. FINRA provides a list of arbitrators from which your lawyer can strike and rank. Your securities counsel must know the system and the players that make up the potential FINRA arbitrator pool.

The Arbitration Panel is chosen from the list that was submitted on the investor's behalf and also the list submitted by the brokerage firm. After the panel assembly, the parties (counsel for the investor and the brokerage firm) conduct the Initial Pre-Hearing Conference or IPHC. This telephonic conference aims to set the arbitration hearing dates and deadlines for discovery and the various motions. Step Four: The Discovery Process

One of the most essential phases of the arbitration process is the Discovery process. Discovery is the exchange of documents and information between parties. There are primary exchanges of documents before the IPHC. However, the in-depth Discovery generally takes place between the IPHC and prior to the hearing dates. Be sure your counsel is intimately familiar with the different types of documents that must be procured to present your case at the arbitration hearings with accuracy.

Prior to the hearings, the parties usually discuss the potential settlement of the claims. In that vein, it may be wise to engage in mediation. Mediation is a one-day non-binding settlement conference. It is not mandatory. However, the process is generally fruitful, and hearing the opposing counsel is always worth a shot.

Stage Five: The FINRA Arbitration Hearing

The last stage is the hearing itself. FINRA Arbitration hearings can range from 3 days to two weeks. However, most hearings last three to four days. The hearing usually takes place in a conference center or at FINRA offices nearest to the investors' place of residence.

The process is similar to a trial. There are opening statements, examinations/cross-examinations, objections, and a closing argument. Be sure your counsel of investment attorneys are seasoned in all phases of the hearing process. Unlike a traditional trial, the verdict or Award is not disclosed after the hearings. It usually takes up to a month for the judgment.

Once the Award is issued and favorable, the brokerage firm has thirty days to pay. As mentioned above, appeals are minimal. If you are successful, you will be pleased with this as the brokerage firms usually cannot drag appeals out for years.

Request Your Free Investment Fraud Consultation

Here at SSEK Law Firm, our securities lawyers have many years of experience helping investors who have been wronged by investment fraud recoup any losses. Whether through a financial product failure or broker misconduct, we are confident that we can help you.

We offer a free, no-obligation case consultation. Get in touch with our team of FINRA lawyers today, and we can evaluate your case.

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