The location or situs of an FINRA securities arbitration hearings is usually based on the nearest location to the customer at the time their account was opened or where they resided at the time the transactions or the events giving rise to their claims occurred.
Service of the initial pleading or Statement of Claim is made by the FINRA on its members. Under FINRA Rules, Customers are not required to arbitrate claims against former FINRA members who have been expelled or have had their registrations revoked.
Respondents in FINRA Securities Arbitrations are provided with 45 days from the service of the Statement of Claim to respond. Answers or Responses typically contain Respondents' version of the facts, and the legal reasons why the customer is not entitled to relief, or why the claim ought to be dismissed.
Sometimes, Answers or Responses may contain copies of important documents, including correspondence or e mails, demonstrating why the facts are different than as alleged in the Statement of Claim.
Thereafter, generally, in securities arbitrations before the FINRA, after Respondents enter their appearances, the parties are provided securities arbitrator selection materials. Each party is provided with certain biographical information, including the educational and employment background, for each proposed securities arbitrator. Interests and potential conflicts are sought to be disclosed, and previous Awards decided by that arbitrator are also available for review.
From these lists and summaries, parties rank, in order of preference, prospective FINRA Securities Arbitrators. A Party may strike, without cause, those persons that they do not wish to serve on their Panel. If the Parties do not agree on proposed arbitrators, or all available arbitrators are stricken by both Parties, then the FINRA will assign an available arbitrator, whom can only be removed or challenged for actual cause or a conflict of interest.
In FINRA Securities Arbitration, customer cases involving claims in excess of $25,000 are typically heard by a Panel of three individual arbitrators, consisting of two public arbitrators and one industry arbitrator. Public arbitrators are typically lawyers, retired judges, professional mediators, and other individuals.
In FINRA Securities Arbitrations, Industry Arbitrators are individuals with a current or recent affiliation with the securities industry, and for the most part are registered representatives, retired registered representatives, branch managers, analysts, accountants, floor traders, or support personnel.
Once a Panel is appointed in FINRA Securities Arbitrationa, a pre hearing conference is held where the parties and the Panel scheduled final hearing dates, discovery deadlines, and other administrative matters.
Discovery and the means to obtain relevant evidence in arbitration is very important. In November 1999, the FINRA adopted a specific Discovery Guide for use in FINRA Securities Arbitrations setting forth those documents and information that are discoverable in customer cases. The FINRA Discovery Guide is available on line at:
Generally, depending on the issues in any particular case, in FINRA Securities Arbitrations public customers should preserve and be expected to produce all written communications between them and their stockbroker, all documents relating to any other securities brokerage or investment accounts, together with their tax returns for a period of at three years before they opened their account. Customers are also expected to provide detailed information relating to their business interests, education, and financial condition.
Among other things, securities brokerage firms in FINRA Securities Arbitrations are expected to produce all documents relating to your account, including new account forms, customer statements, confirmations, and communications between them and their stockbroker or investment professional. Records of complaints or disciplinary action against the stockbroker should also be made available together with information and documents relating to the securities brokerage firm's supervision of the individual broker, the broker's training, and the broker's basis of compensation should also be produced by the brokerage firm in most cases.
In connection with the recommendation of any particular security, the broker or brokerage firm also ought to be obligated to produce documents relating to the basis of any such recommendation, if any, along with information relating to any business relationship with the issuer.
While parties in FINRA Securities Arbitrations are not required to be represented by counsel, securities arbitration is very much a legal, courtroom like, proceeding, where, in most cases, parties should be represented by competent investment fraud or securities counsel.
At FINRA Securities Arbitrations, all testimony is given at the time of a final hearing. Final hearings may last three to four days depending on the complexity of the matter and the quanity of witnesses. In FINRA Securities Arbitrations, parties have the right to make opening statements and summarize what they intend to prove. Parties have the right to call witnesses, and may compel the attendance of nonparty witnesses by Subpoena, by Orders of the Panel, or with the assistance of a state or federal court.
The parties and their witnesses present testimony under oath, and subject to cross examination. Documents are authenticated and offered into evidence. Expert witnesses may be called upon to testify and may be cross examined. Closing arguments are made, and typically, within 30 days, the Panel renders a written Award.
Securities Arbitration Awards are final, and will only be disturbed by a court in very limited circumstances upon the showing of fraud, corruption, or a manifest disregard for the law. Awards against brokers or brokerage firms must be paid within 30 days, or upon application, the FINRA may suspend or revoke their licenses and registrations. Unpaid Securities Arbitration Awards rendered by a Panel in FINRA or NYSE securities arbitration must be docketed, typically in federal court, as a legal judgments in order to attempt to collect or satisfy any such Securities Arbitration Award.
For more information about FINRA Arbitration Procedures go to http://www.finra.org/ArbitrationMediation/Rules/CodeOfArbitrationProcedure/