Cracking the Code: How to Succeed in FINRA's Dispute Resolution Process

October 19, 2023


Investors can file a case for arbitration or mediation with FINRA. What to anticipate during the arbitration or mediation will be covered in this article. After you file a Statement of Claim, FINRA sends both parties a list of potential arbitrators with their background and career information. Both parties rank the arbitrators in order of preference.

Pre-Hearing Conference

Investors who suffer losses due to the negligence or misconduct of their financial advisors or brokerage firms may choose arbitration to seek compensation. While investors can file a criminal complaint against their broker or firm, arbitration provides a quicker and less costly alternative. When a dispute is filed, FINRA assigns the case to an arbitrator or panel of arbitrators. FINRA sends each party an identical list of potential arbitrators, including a disclosure report with detailed information on each person, background, education, and training. The parties rank the arbitrators not stricken from the list in order of preference and submit their choices to FINRA. At the initial pre-hearing conference, which is held telephonically, the arbitrator or panel will set discovery and briefing deadlines and other hearing dates and discuss any other preliminary issues the parties raise. It is common for parties to schedule multiple meetings with a single arbitrator or panel of arbitrators to discuss various topics, which saves time and resources.

Currently, parties may cancel pre-hearing conferences on short notice without incurring a penalty. However, arbitrators' time and effort preparing for pre-hearing meetings could be better spent when withdrawn at short notice. Consequently, late cancellations reduce the incentives for experienced arbitrators to participate in the FINRA arbitration forum and can increase scheduling inconveniences for FINRA staff.


Once you've filed a Statement of Claim, FINRA will assign your case to an arbitrator. The respondent—typically a financial advisor or brokerage firm—will then file an answer, typically denying the charges you've made. Alternatively, the parties can choose to mediate their dispute. A trained, impartial mediator facilitates negotiations between the parties and helps them resolve. A settlement is reached in more than 80% of mediations. During a FINRA arbitration hearing, you will have the opportunity to present evidence and question witnesses. Most claimants hire a FINRA arbitration lawyer for guidance and support. You can also represent yourself. Many law schools offer legal representation through securities arbitration clinics.

The first step is filing a Statement of Claim, which includes the nature of your claim and what damages you're seeking. You must also file a submission agreement and pay the necessary fees to start the arbitration process.

You'll attend a pre-hearing conference after assigning your case to an arbitrator. It is a chance for you to discuss procedural issues with the arbitrator and ask questions about discovery and the hearing schedule. Then, the arbitrator will name a panel of three arbitrators to hear your case. If the arbitration panel finds your favor, they'll issue an award, requiring the financial advisor or brokerage firm to pay you your damages.


When a claimant and the brokerage firm agree to mediate, a neutral third party helps them find a mutually acceptable solution. It's typically faster than arbitration and less costly. In addition, mediation sessions are private and confidential, so what is said during negotiations cannot be used in court if the dispute goes to trial. FINRA's mediators often have subject-matter expertise so that they can provide an expert yet unbiased view of the strengths and weaknesses of each party's case. They can also help the parties see how their dispute fits into broader commercial issues. In some cases, the mediator may suggest a settlement. Unless both parties agree to settle, however, the mediation is non-binding.

Mediation sessions occur in person, over the phone, or through video conference. The attorneys for the parties may represent them. Both sides will present evidence to the mediator during the session and question witnesses. The parties can also submit written submissions to the mediator. The respondent (the broker, advisor, or firm against whom the claim is filed) will receive a copy of the claim and a notice of hearing. The respondent will have 45 days to research the allegations and respond.


In a settlement, both parties agree to resolve the dispute by reaching a mutually acceptable solution. A FINRA arbitrator or panel will listen to arguments and study testimonial and documentary evidence. The arbitrators or panel will then make a decision. The wrongdoer (financial advisor and brokerage firm) must pay the investor money if the arbitrators award the investor. A final hearing is scheduled if the parties do not settle. The final award is based on the majority vote of the arbitrators. The award is binding on the parties and cannot be appealed. The monetary award may be paid in installments or all at once. In arbitration, the right attorney can help you throughout the process, from determining whether or not you have a case to navigating all of the steps and procedures of the arbitration process. An attorney can also guide you through the discovery and mediation processes and ensure you meet critical deadlines. FINRA does not require an attorney, but it is highly recommended. Moreover, if you are concerned about cost, many law schools offer securities arbitration clinics where investors can be represented at no charge.


Carlos Diaz
I believe in making the impossible possible because there’s no fun in giving up. Travel, design, fashion and current trends in the field of industrial construction are topics that I enjoy writing about.

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