Investor Resource
What Is FINRA Arbitration?
FINRA arbitration is the primary dispute resolution forum for investor claims against brokers. Here's how it works.
The Primary Forum for Investor Claims
FINRA — the Financial Industry Regulatory Authority — operates the largest securities dispute resolution forum in the United States. Since virtually all brokerage account agreements contain mandatory arbitration clauses, FINRA arbitration is the primary (and often only) avenue available to investors who have been harmed by broker misconduct. Each year, thousands of investors file claims through FINRA and collectively recover hundreds of millions of dollars from brokerage firms.
The Process Step by Step
The FINRA arbitration process begins when an investor (the claimant) files a Statement of Claim with FINRA, outlining the facts and the relief requested. The brokerage firm (the respondent) then files an Answer. FINRA appoints an arbitration panel — one arbitrator for claims under $100,000, three for larger claims. The parties exchange documents, take depositions, and attend a hearing where each side presents its case. The panel then deliberates and issues a written award, typically within 30 days of the close of the hearing. Awards are final and binding.
Advantages Over Court
FINRA arbitration has several advantages over traditional litigation. It is generally faster — most cases resolve in 12 to 18 months versus years in federal court. It is less formal, with relaxed evidentiary rules that can favor investors. Arbitrators with securities industry experience often understand complex financial products better than a general court. And because most attorneys handle these cases on contingency, there is no financial barrier to bringing a claim. The main downside is the limited right to appeal — arbitration awards are final in almost all circumstances.
Frequently Asked Questions
Who are the arbitrators in a FINRA case?
FINRA maintains a roster of trained arbitrators from diverse backgrounds — retired attorneys, former regulators, financial professionals, and public members. For most cases, the panel consists of a majority of 'public' arbitrators (those with no significant ties to the securities industry) and one 'industry' arbitrator. Parties have the ability to strike arbitrators they find objectionable from the list provided by FINRA.
Can FINRA arbitration awards be appealed?
Only in very limited circumstances — fraud, corruption, evident partiality, or clear procedural misconduct by the arbitrators. Courts give enormous deference to arbitration awards and routinely confirm them. This finality is one reason it's critical to have experienced counsel from the outset.
What if I don't have a mandatory arbitration clause in my agreement?
If your account agreement does not contain a mandatory arbitration clause — or if you have a claim against a firm that is not a FINRA member — you may have the option to file in state or federal court. A securities attorney can review your agreement and advise on the best forum for your claim.
Attorneys Who Handle These Cases
These attorneys have experience with what is finra arbitration? matters.
Nicholas J. Guiliano
The Guiliano Law Group, P.C.
Richard Frankowski
The Frankowski Firm
Christopher J. Gray
Law Office of Christopher J. Gray, P.C.