Do I need an Attorney to Represent Me in a FINRA Arbitration Case?

FINRA arbitration

Although the majority of professional relationships in the financial services industry are very positive, there are instances where a relationship between an investor and an investment professional do not go as planned. If those instances result in unnecessary damages or loss for the investor the dispute may need to be resolved in FINRA mediation (a settlement conference) or in arbitration (a dispute resolution process).

If you are involved in an unfortunate situation, one of the most important decisions you’ll have to make will first be to decide whether or not to hire an investment attorney.

Why Should I Get a Securities Attorney?

Attorneys with experience and expertise in the law, rules, and regulations of the securities industry can be an enormous resource for their investor clients. Attorneys can help arm their clients with essential knowledge as well as provide advice and direction as it pertains to moving forward with arbitration or mediation. These two forms of dispute resolution are a lot like court; however, both are cheaper, faster, and less complex than formal litigation. Arbitration and mediation both utilize the services of one or more neutral third-parties to help review and resolve the issue at hand.

How Does Mediation Work?

The respective parties involved in a dispute voluntarily may elect to hire a third-party unbiased mediator. Mediators often have different areas of expertise, and they often have different styles. For securities and investment matters, having a mediator familiar with the industry, laws, rules, regulations, as well as the Financial Industry Regulatory Authority (FINRA) arbitration process can be extremely helpful. Some mediators are facilitative and they are simply focused on helping the respective parties reach a mutual common ground as a possible settlement. Other mediators are evaluative and in the process of going back and forth between the parties and their counsel, they are evaluating or handicapping the strengths and weaknesses of the claims and defenses being presented. Some mediators combine both of these styles together at the same time.

How Does FINRA Arbitration Work?

When it comes to securities arbitration relating to investment loss issues, the process usually proceeds in the following way. First, a FINRAappointed arbitrator or panel of arbitrators will hear arguments from both parties in a dispute. Next, the arbitrator(s) will review the testimony along with documentary evidence and reach a decision. The arbitrator’s final decisionknown as an award is binding, which means both parties have to abide by it. Generally speaking, FINRA does not provide parties unsatisfied with an award a way through which they can appeal. There are state and federal laws, however, that say there are extremely limited grounds upon which a court may hear a party’s request to do away with a standing award, but such decisions are rare.

The arbitration process is largely dependent on the size of a claim. For example, if a claim is greater than $100,000, then a formal, in-person, hearing decided by a three-person panel of arbitrators is required. Claims of $50,000 or less generally get decided by a single arbitrator, and those greater than $50,000, but lower than $100,000, can be resolved by either of the aforementioned decision makers.

What to Look for in a Securities Attorney –

Whether your dispute may potentially be resolved by way of mediation or arbitration, hiring the right attorney is an important first step for most investors to place themselves in the best position possible to maximize their potential recovery.

In selecting your attorney, you should consider looking for:

  • Someone with experience and knowledge of how to bring a winning case before the FINRA arbitrators. The same skill set is used in a mediation in helping you to achieve the best possible settlement results.
  • Someone who will be honest with you: what are the strengths and weaknesses relating to your claims or the defenses being raised
  • Someone who has the experience and background who can help you select the best arbitrators for your claim. FINRA Dispute Resolution uses an arbitrator ranking system, and attorneys who have first-hand experience with a large number of arbitrators can help provide you with the most insight in how best to approach that arbitrator ranking process.
  • Someone who can look at your dispute from the position of an objective third party. While it is always pleasant to hear about the positives and strengths of your case, you also want someone who has the experience and expertise to anticipate the other side’s strategy as well as the perspective of an unbiased third party. This will help you thoroughly prepare for your mediation or arbitration.
  • Someone who can help advocate for you, but still be able to navigate personal relationships beyond those that are or were just professional (i.e. the actions close family friend or relative, who served as the Financial Advisor).

Initial Attorney Search –

Before you begin to search for representation, it’s a good idea to consult An Investor’s Guide to Securities Industry Disputes, which is published by The PACE Law School Investor Rights Clinic. In addition, the Securities Exchange Commission (SEC) offers the following advice for individuals searching for a securities lawyer.

  • Consult your own attorney, if you have one, for they may be able to tell you whether or not pursuing arbitration is feasible for you.
  • Get in touch with both the American Bar Association (ABA) and the Public Investors Arbitration Bar Association (PIABA). These groups can help you find a qualified attorney in your area, and PIABA attorneys specifically have experience representing investors in securities-based disputes.

Make Sure You Ask Potential Candidates the Following Questions –

It’s important to keep your needs and preferences in mind when selecting a securities attorney, and it’s as well important to interview more than one attorney. During the interview process, it’s a good idea to ask the following questions:

What is your experience representing investors in securities arbitration? Like in any instance where there is a lot of money on the line, you want to take every available opportunity to ensure the best possible outcome. Hiring a securities attorney who possesses requisite knowledge of the law, rules, regulations at issue as well as the procedures and any applicable precedent will be essential. Ask the attorney how long they’ve been in business and how many securities arbitration cases they’ve handled, including how many they have actually tried.

How will you advocate for my best interests? Investors who have incurred unnecessary losses do not always know exactly the best way to articulate how they were harmed, or how to accurately and persuasively approach the issues of damages. An experienced securities arbitration attorney will be able to take the facts you give them, along with their own research and experience, and present them in the best possible light during the arbitration or mediation process. They will also be able to coach you in the event you are called to testify, or help you anticipate the questions that a mediator is likely going to ask you. In short, they will help you put your best foot forward at the time when you need it the most.

How do you get paid? Some securities attorneys work based on a standard hourly rate, others work on a fee-cap basis, some on a contingency fee basis, and some may be willing to consider a hybrid arrangement that might combine one or more of these methods. In most cases where investor clients have suffered unnecessary losses, they are not inclined to take any further economic risk, and they prefer to opt for a contingency fee arrangement. This typically means you won’t have to pay any attorney’s fees unless there is a positive recovery in your favor. Always read the representation agreement presented by an attorney to make sure you understand the terms, and be sure to ask any questions before you sign.


Scroll to Top