The Financial Industry Regulatory Authority (“FINRA”) operates the largest securities dispute resolution forum in the country where investors can file an arbitration claim when they have a dispute involving the business activities of a brokerage firm or one of its brokers. Arbitration is similar to filing a lawsuit in court, but it is typically faster and cheaper than a court case.
An investor initiates an arbitration by filing a Statement of Claim which lays out the basis for the investor’s complaint and the relief being sought. After the brokerage firm or broker receives the Statement of Claim, they are given an opportunity to file an Answer which lays out their “side of the story” and all applicable defenses. Thereafter, the parties select a neutral third party, called an arbitrator, to ultimately resolve the dispute.
The amount of an investor’s claim determines the number of arbitrators and the hearing process. Claims involving more than $100,000 require an in-person hearing decided by three arbitrators. Claims under $100,000 are decided by one arbitrator, while claims under $50,000 can be decided by the lone arbitrator without a hearing and solely on the submitted written materials. After the parties conduct the in-person hearing before the arbitrators (which is similar to a trial, but less formal), the arbitrators issue the decision, called an award.