To arbitrate a dispute through FINRA (Financial Industry Regulatory Authority), you generally need to meet the following requirements and follow specific procedures:

1. Eligibility:

• Parties Involved: FINRA arbitration is typically used for disputes between FINRA members (broker-dealers), associated persons, and their clients. This includes disputes between brokers and investors, and among brokers and firms.
• Arbitration Agreement: Many brokerage firms and financial advisors include mandatory arbitration clauses in their contracts. If you have agreed to such a clause, you may be required to resolve your dispute through FINRA arbitration.
• Customers of Firm or Associated Person.  Individuals who are customers of an associated person or a brokerage firm that do not have an arbitration agreement can also compel arbitration against either the firm or the associated person, pursuant to the FINRA rules.

What are the Differences Between FINRA Arbitration and Court?

FINRA arbitration and court proceedings differ in several key ways: 

1. Nature of the Forum

• FINRA Arbitration:
• Private: Arbitration is a private process administered by FINRA, which is a self-regulatory organization and its records are not open to the public.
• Panel of Arbitrators: Disputes are resolved by a one or three arbitrator panel, who come from a variety of different areas and have many different types of backgrounds.
• Court:
• Public: Court proceedings are public, and the judicial process is overseen by a judge.
• Judge or Jury: Cases are decided by a judge or a jury, depending on the case and jurisdiction.

2. Procedural Differences

• FINRA Arbitration:
• Streamlined: The arbitration process is often less formal and more streamlined than court proceedings. It typically involves fewer procedural steps and can be quicker and more cost effective
• Discovery: Discovery (the exchange of evidence) is more limited in arbitration and generally involves on the exchange of documents.
• Rules: FINRA has specific rules governing its arbitration process, which are designed to be less formal and more efficient than court procedures.
• Court:
• Formal: Court proceedings follow formal rules of procedure and evidence, which can be complex , time-consuming, and usually more expensive.
• Discovery: There is generally more extensive discovery in court but it gives the parties broader access to evidence.
• Rules: Court proceedings are governed by state or federal rules of procedure, which are stricter and have less flexibility.

3. Cost and Time

• FINRA Arbitration:
• Potentially Lower Cost: Arbitration can be less expensive due to its streamlined nature of discovery and reduced procedural requirements.
• Quicker Resolution: The arbitration process is often faster than court litigation, depending on the jurisdiction.
• Court:
• Potentially Higher Cost: Litigation can be more expensive due to discovery expenses, court costs, and the length of the process.
• Longer Duration: Court cases can often take years to resolve, especially in certain jurisdictions where Courts have extensive dockets.

4. Appealability

• FINRA Arbitration:
• Limited Appeals: FINRA arbitration awards are generally final and binding, with very limited grounds to overturn the award in Court.
• Court:
• Appeal Rights: Court decisions can usually be appealed to a higher court, providing parties with opportunities to contest the outcome or other errors.

5. Nature of the Decision

• FINRA Arbitration:
• Arbitrators: Decisions are made by arbitrators who are trained by FINRA.  The decision is only binding on industry members, unless it is confirmed in Court.
• Court:
• Judge/Jury: Decisions are made by a judge or jury based on the application of law and evidence presented during the trial.
• Enforcement: Court judgments can be enforced through various legal mechanisms, including appeals and post-judgment motions.

6. Privacy

• FINRA Arbitration:
• Confidentiality: Arbitration proceedings are generally private, and the details of the dispute and the award are not publicly disclosed.
• Court:
• Public Record: Court proceedings are part of the public record, and the details of the case, including filings and the judgment, are typically accessible to the public.

7. Flexibility

• FINRA Arbitration:
• Flexibility: Arbitration procedures are often more flexible, allowing parties to tailor the process to some extent, as long as the parties can agree on such procedures.
• Court:
• Rigidity: Court procedures are less flexible and are strictly governed by procedural rules and statutes.  Modifications thereto generally require court approval.

If you need to file a FINRA arbitration case, please contact the securities and investment fraud attorneys at Israels & Neuman, PLC for a free and confidential consultation.