Common Types of FINRA Disputes

FINRA (Financial Industry Regulatory Authority) handles various disputes within the securities industry, encompassing issues between investors and brokers or between brokers and brokerage firms. Understanding these common types of disputes can help investors recognize potential problems and seek timely legal assistance. Contact us today for immediate assistance.

What is FINRA?

FINRA, the Financial Industry Regulatory Authority, is a non-governmental organization that acts as a self-regulatory body for brokerage firms in the United States. Its primary role is to protect investors by ensuring that the industry operates transparently, ethically, and in accordance with established rules and regulations.

Key Functions and Responsibilities of FINRA:

• Regulation and Oversight: FINRA plays a crucial role in protecting investors by regulating trading in equities, corporate bonds, securities futures, options and other types of investments.
• Rule Enforcement: FINRA writes and enforces rules that all registered broker-dealer firms and registered brokers in the U.S. must follow. These rules protect investors and ensure the integrity of the financial industry.
• Licensing and Registration: FINRA handles the testing and licensing of brokers and investment advisors. This process includes thorough background checks and education on financial regulations.
• Investor Education: Through various programs and initiatives, FINRA provides educational materials and tools to help investors make informed financial decisions and understand complex financial products.
• Dispute Resolution: FINRA operates the largest securities dispute resolution forum in the United States, facilitating the resolution of conflicts between investors and brokers, as well as between brokerage firms, through arbitration and mediation.

By performing these functions, FINRA seeks to prevent financial fraud, promote transparency, and reduce the risk for investors, thereby bolstering confidence in the U.S. financial industry.

Common Types of FINRA Disputes

Here are several prevalent types of disputes that are often addressed through FINRA arbitration:

1. Unauthorized Trading

This dispute arises when a broker executes trades in an investor's account without prior authorization or consent. Unauthorized trading is a clear violation of FINRA rules and can result in significant unintended financial exposure or losses for the investor.

2. Misrepresentation and Omission

Investors may file claims against brokers who provide misleading information or fail to disclose important facts about an investment. Misrepresentation can lead investors to make decisions based on incomplete or false information, potentially resulting in substantial financial losses.

3. Suitability Violations

Brokers must recommend suitable investments based on the client’s profile, including their financial situation, investment objectives, risk tolerance, and other factors. Disputes occur when investments are unsuitable for the client, often leading to unnecessary risk and losses.

4. Churning

Churning involves excessive trading by a broker to generate commissions rather than to benefit the client’s investment objectives. This unethical practice can deplete an investor’s portfolio through unnecessary fees and is considered a serious breach of fiduciary duty and trust.

5. Negligence

This type of claim involves brokers who fail to adhere to the standard of care required in managing a client's investments. Negligence can lead to improper handling of investment portfolios, which, in turn, results in financial losses for the investor.

6. Failure to Supervise

Brokerage firms must have adequate supervisory systems in place to monitor the activities of their brokers. A failure to supervise claims may arise if the firm does not effectively oversee its brokers, leading to violations of securities laws or FINRA rules that harm investors.

7. Fee Disputes

Disputes related to fees typically involve allegations that brokers have charged excessive or undisclosed fees not agreed upon by the investor. Such disputes may also question the fairness or appropriateness of the fees relative to the services provided.

8. Product Defects

Investors may also claim that specific investment products are inherently flawed or unsuitable. These disputes often focus on complex products like structured products, derivatives, or non-traditional investment vehicles that were not adequately explained or were misrepresented in terms of risk.

9. Breach of Contract

This arises when either party in the brokerage agreement fails to fulfill their contractual obligations. Investors might claim breach of contract if a broker or firm does not perform as explicitly stated in the terms of their agreement.

10. Employment Disputes

Although not directly involving investor claims, employment disputes within brokerage firms often find their way to FINRA arbitration. These can include wrongful termination, discrimination, or disputes over compensation or employment contracts.

What to Expect: FINRA's Dispute Resolution Process

Navigating a FINRA dispute involves several key steps. Here’s a concise breakdown:

• Filing the Claim: Initiate by submitting a Statement of Claim and a signed Submission Agreement to outline the dispute details and relief sought.
• Responding to the Claim: The respondent has 45 days to file an Answer, addressing the claim and possibly raising counterclaims.
• Arbitrator Selection: Both parties choose arbitrators from a FINRA-provided list, influencing the panel based on expertise and conflict of interest.
• Prehearing Conference: A meeting to set the arbitration timeline, discuss discovery, and establish hearing dates.
• Discovery Phase: Exchange of relevant documents and information between parties to gather evidence.
• Arbitration Hearing: Presentation of evidence and arguments before the arbitrators in a less formal setting than court.
• Decision and Award: Arbitrators deliver a binding decision, typically within 30 days post-hearing, determining any financial awards.
• Post-Award Process: Enforcement of the award through the courts, if necessary, with very limited options for appeal.

This streamlined view of FINRA's dispute resolution process helps parties effectively prepare and manage their expectations throughout the arbitration.

How a FINRA Lawyer Can Help

At Weltz Law, we represent clients in disputes governed by the Financial Industry Regulatory Authority (FINRA). Our dedicated team of FINRA lawyers is equipped to assist you through the complex landscape of securities law and the FINRA arbitration process, ensuring your interests are robustly defended. Here is how our FINRA claims lawyers can assist you:

Experienced Guidance Through FINRA Processes

Navigating FINRA's rules and procedures can be daunting. Our arbitration claim lawyers provide experienced guidance, helping you understand the regulatory framework and what to expect throughout the arbitration or mediation process. This includes preparing for hearings, adhering to filing deadlines, and ensuring compliance with all procedural requirements.

Representation in Arbitration and Mediation

If you are involved in a dispute with a broker or brokerage firm, our lawyers can represent you in FINRA arbitration or mediation. We advocate presenting your case effectively to achieve the best possible outcome. This involves assembling evidence, preparing witness testimony, and crafting compelling arguments that uphold your position.

Defending Your Rights and Interests

A FINRA lawyer from Weltz Law works tirelessly to protect your rights as an investor. Whether you're facing issues related to unauthorized trading, broker negligence, or misrepresentation, we are committed to securing justice for you and ensuring that any financial harm is appropriately addressed.

Long-Term Legal Support

The securities industry is dynamic and can present ongoing legal challenges. Weltz Law offers long-term support, helping you navigate future issues efficiently and effectively. Whether you need periodic reviews of your investment activities or ongoing advice on securities law compliance, we are here to assist.

How Our FINRA Lawyers Help Maximize Recovery

At Weltz Law, our dedicated team of FINRA lawyers is committed to helping our clients maximize recovery in securities disputes. Here’s how we assist:

• Thorough Case Assessment: We begin by conducting an in-depth evaluation of your case to understand the specifics of the dispute and identify all potential areas for recovery.
• Strategic Evidence Gathering: Our securities lawyers will gather and organize evidence, including financial records, communications, and expert testimonies, to build a strong foundation for your claim.
• Calculation of Damages: We work with financial experts to accurately calculate direct and consequential damages you may be entitled to, ensuring that all possible losses are accounted for in your claim.
• Skilled Negotiation: Our FINRA lawyers are adept at negotiating with opposing counsel to reach settlement agreements that adequately compensate our clients without needing a hearing.
• Aggressive Representation at Hearings: If your case proceeds to arbitration, our lawyers provide robust representation, presenting your case effectively to maximize the likelihood of a favorable outcome.
• Post-Arbitration Support: Following the arbitration, we assist in enforcing the arbitration awards and advise on any necessary legal steps to collect the awarded damages.

Ready to Pursue Justice?

If you believe you've suffered due to broker misconduct or have a dispute that requires arbitration, don't hesitate to reach out. At Weltz Law, our experienced FINRA lawyers are ready to evaluate your case, protect your investments, and secure your financial future.

Contact us today for a consultation and take the first step towards resolving your securities dispute effectively.

FINRA Disputes FAQs

How do I file a FINRA claim?

To file a claim, submit a Statement of Claim and a signed Submission Agreement to FINRA. This initiates the arbitration process, detailing the dispute and the relief sought.

How are arbitrators selected?

FINRA provides a list of potential arbitrators. Both parties review and rank these arbitrators based on their qualifications and potential conflicts of interest. The selected arbitrators will oversee the case.

What happens during the prehearing conference?

During the prehearing conference, procedural matters such as hearing dates, discovery deadlines, and other logistical details are discussed and established to set the timeline for the arbitration process.

What is the discovery phase?

The discovery phase involves exchanging relevant documents and information between parties. This phase is crucial for gathering evidence to support each party’s case.

What occurs at the arbitration hearing?

Both parties present their evidence and arguments before the arbitrators in an arbitration hearing. The process is less formal than a court trial, but it is a critical stage for presenting a case.

What is an arbitration award?

An arbitration award is the final decision made by the arbitrators after the hearing. It details the findings and any monetary compensation or other relief granted. The award is typically issued within 30 days of the hearing’s conclusion and is binding on both parties.

Can arbitration awards be appealed?

Arbitration awards are generally final and binding, with very limited grounds for appeal, such as arbitrator misconduct or significant procedural errors that affected the fairness of the hearing.

How can a FINRA lawyer help me?

A FINRA lawyer can guide you through the arbitration process, help gather and present evidence, calculate and argue for damages you may be able to claim, negotiate settlements, and provide representation during hearings to maximize your chances of a favorable outcome.

What are the costs involved in FINRA arbitration?

Costs can include filing fees, attorney’s fees, arbitrator fees, expert and witness fees or costs, and other administrative expenses. However, arbitration is generally more cost-effective than traditional litigation.

How long does the FINRA arbitration process take?

The entire process typically takes 12 to 18 months, from filing the claim to receiving the arbitration award. This timeline can vary based on the complexity of the case and the parties’ cooperation.

What is the difference between FINRA arbitration and mediation?

Arbitration results in a binding decision made by arbitrators, while mediation involves a neutral third party who helps the disputing parties reach a mutually agreeable settlement. Mediation is typically less formal and can be quicker, but it does not result in a binding decision unless both parties agree to the terms.

Is it mandatory to go through FINRA arbitration?

Most brokerage agreements include a mandatory arbitration clause requiring disputes to be resolved through FINRA arbitration rather than court litigation. It’s important to review your brokerage agreement to understand your specific obligations.

What should I look for when choosing a FINRA lawyer?

Look for a lawyer with experience in securities law and a track record of handling FINRA arbitration cases. They should have strong negotiation skills, a thorough understanding of FINRA rules, and the ability to effectively present your case.

Can I represent myself in FINRA arbitration?

While you can represent yourself, hiring an experienced FINRA lawyer is highly recommended. The arbitration process involves complex legal and financial issues that can be challenging to navigate without professional assistance.

What types of evidence are important in a FINRA case?

Relevant evidence can include account statements, trade confirmations, email communications, recorded phone calls, and expert testimony. Proper documentation and presentation of evidence are crucial for building a strong case.

How is a FINRA arbitration award enforced?

If the losing party does not voluntarily comply with the arbitration award, the winning party can seek to confirm the award in court, which makes it enforceable as a legal judgment. This step ensures the award is legally binding and can be collected.

What if new evidence is discovered after the arbitration award is issued?

New evidence discovered post-award is generally not grounds for reopening the case. FINRA arbitration awards are final and binding, with limited exceptions for appeal based on procedural issues or arbitrator misconduct.

What happens if a broker is no longer with the firm?

If the broker involved in the dispute has left the firm, the arbitration can still proceed. The brokerage firm remains responsible for the actions of its brokers during their employment and can be held liable in the arbitration.