What is Securities Arbitration?
Securities Arbitration is the process by which customer disputes are resolved with respect to the investments they made through Registered Representatives of the securities industry or their employing Broker/Dealer firms. The majority of public investors typically sign a pre-dispute arbitration clause prior to making any investments. The effect of signing this agreement is that investors waive their right to pursue their claim through the courts. Customers need to be aware that they are waiving these rights when they sign the agreement with the firm, and the courts have upheld the validity of these agreements to arbitrate.
Arbitration will take place in one of the forums indicated in the pre-dispute arbitration agreement. The New York Stock Exchange (NYSE) and the Financial Industry Regulatory Authority (FINRA) (formerly NASD) are the neutral forums included in most customer agreements. Although customers are required to submit their claims in one of the listed forums instead of through the courts, bringing their claims in front of an experienced panel of arbitrators with vast experience in the securities industry has its advantages. First, the arbitration process is streamlined thereby enabling investors to avoid the costly and time consuming court systems. Second, the panel of arbitrators are well versed in all types of securities matters. Compared to an unsophisticated panel of jurors or a judge who is unaware of the nuances of the highly specialized financial services industry, this panel of arbitrators are usually a better audience for the investor to present their claims. Finally, the process is streamlined so that long delays from extensive discovery and other time-consuming tactics typically found in the courts can be avoided in most circumstances.
Investors can expect to have a final resolution of their claim within 9-18 months of filing their claim. The process mirrors the courts in that a claim is filed by the aggrieved party, the Registered Representative or the Representative's firm typically files an answer to that claim, and parties present their case through the presentation of evidence by way of witnesses, documents and personal testimony. All of the parties will have an opportunity to cross-examine the other side's witnesses and may object to the introduction of evidence, with the decision on its admission to be decided by the panel.
Upon the close of the arbitration hearing, the panel of arbitrators will deliberate before issuing their decision. The panel has 30 days from the close of the hearing to issue their decision, which does not have to have an explanation attached. Just like through the courts, the award issued by the arbitration panel is final and binding and full effect is given to its decisions by the courts.
What role do Securities Attorneys play?
Securities Attorneys serve many different functions with respect to investments. The vast majority of attorneys who practice Securities Law service the needs of large and small companies, assisting with their regulatory and financial reporting requirements. A very few attorneys focus their time solely on the representation of aggrieved investors who have a dispute with their Registered Representative or Representative's firm.
Securities Attorneys servicing investors represent these individuals in the arbitration of their disputes. In addition, they can offer investors advice on their legal rights prior to making an investment. When an investor has been subject to Stock Broker Fraud and decides to file a claim against a Representative or investment firm, they typically will hire an attorney who has experience in the field of securities and investments with particular knowledge of Registered Representative and the brokerage firm and the FINRA disciplinary rules and procedures. While an individual may file a claim without the assistance of an attorney, it is a good idea to hire an attorney who is experienced in these matters, as Representatives and firms will typically be represented by counsel in defending against these claims.
When looking for an attorney to represent you in filing your claim, it is important to find one who is experienced in securities arbitration. Due to the many rules and nuances involved in this practice area, it is advised to hire counsel who dedicate a majority of their practice to the prosecution of individual investor's claims.
Securities Attorneys will typically charge clients on a contingency fee basis, sharing in the recovery, if any is awarded. Investors should speak with different attorneys prior to retaining one about the fees and costs associated with representation, as well as the attorney's experience in the field of securities arbitration, and the length of time the attorney has been in practice.
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