FINRA Arbitration Process Explained

Understanding the FINRA Arbitration Process: A Comprehensive Guide for Investors

At Iorio Law PLLC, we specialize in representing investors nationwide in FINRA arbitration, ensuring your rights and financial interests are protected. This guide provides a clear, step-by-step explanation of the FINRA arbitration process, from initiation to award enforcement.

If you’ve suffered financial losses due to broker misconduct, unsuitable investments, or other securities-related disputes, the FINRA arbitration process may be your path to recovery.

What Is FINRA Arbitration?

The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization overseeing brokerage firms and their registered representatives in the United States.

FINRA arbitration is a dispute resolution mechanism used to settle disagreements between investors and brokerage firms or financial advisors. Unlike litigation, arbitration is typically faster, less expensive, and more private, with cases resolving in about 12-18 months on average.

When Is FINRA Arbitration Required?

Most brokerage agreements include a pre-dispute arbitration clause, mandating that disputes be resolved through FINRA arbitration rather than court.

Claims must generally be filed within six years of the event giving rise to the dispute. If you’re unsure whether your case qualifies, consulting a securities arbitration attorney, such as those at Iorio Law PLLC, can provide clarity.

The FINRA Arbitration Process: Step-by-Step

The process typically unfolds in seven main stages, from filing to award. Timelines can vary, but settled cases usually resolve within a year, while those that proceed to a hearing take around 12 to 18 months. Here’s a detailed breakdown:

Step 1: Consultation and Evaluation

At Iorio Law PLLC, the process begins with a confidential, free consultation. Attorney August M. Iorio personally evaluates your case to determine if arbitration is the appropriate avenue for your specific dispute, which can include issues such as:

Step 2: Preparing and Filing the Statement of Claim

If you have a meritorious claim, our firm drafts and files a Statement of Claim on your behalf. This critical document outlines:

Facts of the case
Legal grounds for your claim
Amount of damages sought

Accurate and persuasive drafting at this stage is crucial to presenting your position to the arbitration panel.

To file a claim, a claimant must also submit a signed FINRA submission agreement, agreeing to abide by FINRA’s procedural rules, and a filing fee. The filing fee, which is partially non-refundable, is calculated based on the size of the claim.

Step 3: Respondent’s Answer

Once the Statement of Claim is filed, FINRA serves the claim on the respondent (broker or brokerage firm), who typically has 45 days to respond by submitting an Answer. The Answer may deny allegations, provide defenses, or assert counterclaims. The respondent must also submit a signed FINRA submission agreement and pay the applicable case fees.

Step 4: Selection of Arbitrators

The next step is the selection of the arbitrators who will act as judge and jury.

FINRA Dispute Resolution Services uses a strike and rank system to appoint the arbitrators for specific cases.

The process begins when FINRA generates random lists of potential arbitrators using an algorithm. Both parties have input in selecting neutral panel members. Parties can strike names (up to limits) and rank the rest.

FINRA appoints based on combined rankings, ensuring that there are no conflicts of interest. Investors can opt for all-public panels in larger cases for added neutrality.

Challenges for cause (e.g., bias) are possible, with decisions favoring the customer in close calls.

The size of the arbitration panel is typically:

One arbitrator for claims under $100,000
Three arbitrators for claims over $100,000

Step 5: Initial Pre-Hearing Conference

Once arbitrators are selected, an initial pre-hearing conference is held virtually, where the parties and arbitrators schedule hearing dates and set discovery deadlines. Our firm actively participates, advocating for timelines and procedures beneficial to your claim.

Step 6: Discovery Process

During discovery, both parties exchange documents and information relevant to the claim. Unlike court litigation, discovery in arbitration is streamlined and limited, reducing delays and costs. Generally, there are no depositions or interrogatories.

Thorough discovery is crucial— missed evidence can weaken your case. At Iorio Law PLLC, we excel at uncovering crucial evidence to strengthen your case.

Step 7: Motion Practice

Sometimes disputes arise during discovery. When necessary, Iorio Law PLLC files motions to compel the opposing party to provide essential documents or information.

From time to time, other prehearing motions may also be necessary. Our experienced securities arbitration attorneys have extensive experience in understanding the types of motions available to maximize leverage and strengthen your case.

Step 8: Mediation (Optional) / Settlement Negotiations

Many cases settle before going to a hearing, often through negotiation or mediation facilitated by FINRA. In 2023, approximately 72% of cases were settled, with an average settlement of $250,000 and a median settlement of $75,000, according to the FINRA Dispute Resolution Annual Report 2023.

FINRA also offers voluntary mediation, a confidential, informal negotiation facilitated by a neutral third party. Mediation can resolve disputes more quickly and amicably without the need for a formal hearing.

Our firm provides strategic counsel on whether mediation or settlement is the most appropriate course of action in your particular circumstances.

Step 9: Arbitration Hearing

The arbitration hearing is less formal than a court trial, but equally important. Both parties present evidence, call witnesses, and make persuasive arguments before the arbitration panel. At Iorio Law PLLC, we meticulously prepare and present your case, effectively cross-examine opposing witnesses, and deliver compelling arguments on your behalf.

Hearings resemble mini-trials, held in person near where the dispute arose and the Claimant resides.

Structure includes:

Opening statements
Presentation of evidence and witnesses
Cross-examination
Closing arguments

Hearings are recorded digitally. For smaller claims, simplified procedures (no hearing or limited hearing) may apply.

Expert witnesses and preparation are key. Our nationwide practice means we’re ready for hearings anywhere.

Step 10: Arbitration Decision and Award

After the hearing, the arbitrators deliberate and issue a decision, typically within 30 days. The arbitration panel’s decision, known as the award, is legally binding and enforceable in court.

Here are two examples of arbitration awards obtained by August Iorio:

Enforcing the Arbitration Award

If the brokerage firm fails to promptly pay the awarded damages, our firm moves quickly to confirm the arbitration award in court, compelling payment and safeguarding your financial recovery.

Settlement

Benefits of Hiring a Securities Arbitration Attorney

While self-representation is possible, most parties— especially firms— use attorneys. An experienced lawyer can:

Navigate rules and deadlines
Maximize recoveries
Handle complex evidence and negotiations

Studies show that represented claimants often fare better. Don’t go it alone— level the playing field.

Why Choose Iorio Law PLLC for Your FINRA Arbitration?

Our dedicated representation is built on:

Experience and Expertise: Attorney August M. Iorio has extensive experience successfully handling complex FINRA arbitration cases, securing significant awards for clients.
Client-Focused Advocacy: Personalized attention and strategic guidance tailored specifically to your claim.
Nationwide Representation: Although based in New York City, Iorio Law PLLC represents investors nationwide, delivering exceptional advocacy regardless of location.

Schedule Your Free Consultation Today

If you have suffered losses due to broker misconduct or investment fraud, take the first step toward financial recovery. Contact Iorio Law PLLC today for a free, confidential consultation and explore how FINRA arbitration can protect your investment interests.

Iorio Law PLLC
One World Trade Center, 85th Floor
New York, NY 10007
Phone: (646) 330-4624
Email: info@iorio.law

This guide is provided for informational purposes only and should not be considered legal advice. Consult an attorney for your specific situation.

Client Reviews

August Iorio is a wonderful, very competent attorney. He helped me through a very complicated financial situation to a result that benefitted me greatly. He is responsive, efficient, and very accommodating to my personal situation. I highly recommend him.

Christine L.

I was impressed with August Iorio's directness and clarity in explaining the claim process and how it might work out. I also appreciated his promptness in getting back to me when I had questions or other concerns. The law firm is very good at what it does.

Art H.

August Iorio was the lead on our case. His professional demeanor, partnered with his responsiveness to our questions, suggestions, and ideas made us feel as if we were a team with a common goal. He always kept us updated and informed and gave us realistic expectations which resulted in a timely...

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