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Arbitrating an Investor Case vs Suing in Court

An investor who is abused by his or her securities broker cannot sue in court.  Instead, the investor must sue the broker or the brokerage firm in arbitration before the Financial Industry Regulatory Authority, otherwise known as “FINRA.”

FINRA maintains its own arbitration forum that shares certain features of court litigation, but is also different in many material ways.  Here are seven key differences between FINRA arbitration and litigation in court:

  • First, FINRA staff processes the claim filed by the customer against the broker or firm and administers the entire case, not the clerk of court.
  • Second, there is no judge or jury that decides a FINRA arbitration case. Instead, one or three arbitrators are appointed to hear and decide the case and are ranked and selected by the parties from a pool of pre-approved arbitrators.  The number of arbitrators depends on the amount of damages at issue.
  • Third, the FINRA arbitration process is generally less expensive than court because there are no depositions in a FINRA arbitration case and the typical FINRA arbitration proceeding will last 12-18 months from the filing of the claim through the final hearing.
  • Fourth, because there are no depositions in a FINRA arbitration case, it is critically important to have a skilled claimant’s lawyer who knows the securities industry policies and rules because the lawyer will have to cross-examine key witnesses without having taken their deposition.
  • Fifth, cases filed before FINRA often can be handled more efficiently than in court, which often gives investors access to a lawyer who may accept the case on a contingency fee.
  • Sixth, the result of a FINRA arbitration award is near final in that appellate remedies are limited and more than 99% of the time a petition to vacate an arbitration award filed in court will be denied.
  • Seventh, a FINRA arbitration is tried in a large conference room at a conference table with the lawyers, parties, and arbitrators all sitting down. This is quite different from the setting and dynamic of a courtroom where the examining lawyer stands at a podium and often moves around while questioning the witness, presenting an opening statement, or giving a closing argument.

Arbitrating an Investor Case

In sum, there are a variety of differences between a securities arbitration before FINRA and a case a litigated in court. If you believe you have a claim against an investment professional, contact the securities attorneys of McCabe Rabin.