Arbitration is an alternative to traditional litigation that many California investors find has many benefits. Arbitration usually costs less money and takes less time than litigation, and often produces better results.
Arbitration through the Financial Industry Regulatory Authority (“FINRA”) is a specific type of arbitration available to investors and brokers or brokerage firms.
Eligibility for FINRA arbitration
FINRA arbitration is only available to claims between investors and an individual or entity that is registered with FINRA. The claim must be filed within 6 years from the time the events that cause the dispute happened.
Although FINRA arbitration is less formal than traditional litigation, the FINRA arbitration process involves many of the same steps.
The arbitration process starts with a claim filed by the person initiating the dispute. This person is called the claimant. The person or entity the claim is filed against is called the respondent, and they can respond to the complaint.
Discovery and pre-trial conferences
After an arbitrator is chosen, the discovery process begins. This involves the claimant and respondent exchanging documents and evidence they plan to present at the hearing.
You may also have a pre-hearing conference. This is a meeting between the parties and the arbitrator to schedule the arbitration hearing.
The pre-hearing conference is typically held by telephone. Any minor issues that need to be resolved, such as missed discovery deadlines, are addressed at the pre-hearing conference.
More than one pre-hearing conference may be held, depending on the issues involved.
The arbitration hearing
The FINRA arbitration hearing is a meeting between the claimant and respondent, their attorneys and the arbitrator. Each party presents their arguments and submits their evidence.
An arbitrator does not usually decide the case immediately after the arbitration hearing. Rather, they issue a written decision to each party.
The written decision is called an award and states what relief, if any, the claimant is entitled to. Like a court order, this decision is binding, so it is best to be thoroughly prepared for the hearing to increase your chance of success.