What You Need to Know Before Filing a FINRA Arbitration Case

Almost every adult in America is familiar with the phrase, “Money makes the world go ’round.” That is why so many people work to increase their net worth by investing in promising ventures. 


The stock market is one of the best places to invest your money. But that is if you do it right. Finding the right stock brokerage firm and a trustworthy financial advisor helps secure your investment and allows you to spend time doing more important things like travelling the world.


However, you cannot trust every stockbroker. Fraudulent brokers exist in Wall Street, and this tends to put off new investors from joining the exciting world of trading stocks. 


The Financial Industry Regulatory Authority (FINRA) was set up to deal with deceitful brokers in Wall Street. Every brokerage firm has to abide by FINRA rules before they are allowed to operate.


What Happens When FINRA Rules Are Broken?

Sometimes a brokerage firm might violate one or more FINRA rules, resulting in losses for the investor. When this happens, an investor has the right to file a case against the brokerage firm. Disputes against a stockbroker are resolved in a FINRA arbitration proceeding rather than a court of law. An investor who wins an arbitration case against a stock brokerage firm is sometimes given compensation by the firm.


Finding the Right Attorney for a FINRA Arbitration Proceeding

Arbitration proceedings in disputes between investors and brokerage firms follow slightly different procedures from normal court cases. Due to this, the investor must hire an attorney who is familiar with FINRA rules and regulations. 


One of the things the attorney will help with is FINRA arbitration damages calculations to help the investor ask for the right amount of compensation. Brokerage firms have some of the best minds in law on retainers. Going into the arbitration hearing without a team that can put up a good fight is equal to shooting yourself in the foot.


The Arbitration Procedure

FINRA arbitration proceedings follow certain phases that come with deadlines that both parties have to meet. Let’s take a brief look at the most significant phases investors ought to know before filing an arbitration proceeding.

1. Consultation

During the consultation phase, the investor approaches an attorney to inform them of their grievances. The attorney will assess the case and offer advice on whether the investor has a strong case or not. Compensation for the attorney is also negotiated in this phase. 

2. Document Gathering

The attorney collects accounting statements, contracts, and any other relevant paperwork needed to file a convincing case.

3. Financial Analysis

An analysis of the financial records is then done to establish the amount of loss incurred and what damages the investor should ask to be awarded.

3. Legal Analysis

The attorney then tries to prove that your losses came from the brokerage firm’s failure to act in your best interests. In this phase, the attorney goes ahead to formulate a legal strategy to prove their findings in the arbitration proceeding.       

4. Drafting the Claim

In this phase, the attorney writes up a convincing statement that contains all the details of how the brokerage firm acted contrary to what the investor mandated them to do. The attorney then files the statement for FINRA dispute resolution to kickstart the process. The brokerage firm will be notified of the case filed against them and called in to answer the claims.  

5. Discovery Proceedings    

This phase involves the investor presenting evidence regarding the brokerage firm. The firm has a chance to respond. Each side argues their case in the presence of a panel.

6. Mediation and Settlement Agreement     

Depending on how each side presents its case, each member of the arbitration panel gives their verdict. The compensation claim can be allowed or denied. Both parties can also come to an amicable solution through a mediator. If the investor wants to pursue the matter further, they can do so in a final arbitration hearing, which resembles a court hearing with witnesses, evidence, and representation.


Following a successful arbitration case, the investor can receive compensation for their investment, damages, legal fees, and any other losses incurred during the process. 



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