What to Expect: FINRA’s Dispute Resolution Process

The Financial Industry Regulatory Authority (FINRA) is a department of the Securities and Exchange Commission (SEC). They are in charge of writing and enforcing regulations concerning the activities of all registered broker-dealer firms and registered brokers within the United States. The regulations that they write and enforce are all focused on the ethical nature of financial transactions.

They also work to audit brokerages for compliance with all regulations, encourage and foster market transparency, and educate investors on the regulations and their ethical foundation. These regulations are enforced through fines, orders of restitution, and building of cases that lead to litigation through the SEC.

If you are going into the FINRA’s Dispute Resolution process, you may feel apprehensive about what to expect. There are two types of non-judicial proceedings, which are arbitration and mediation. Which one you are involved in will depend on a wide range of factors, including what parties are involved and what actions led to the need for dispute resolution.

Arbitration feels like going to court in that there both parties will meet, and a neutral third-party individual called the arbitrator will listen to both sides and decide how the dispute should be resolved. Whatever the arbitrator determines is final and binding, there are no options for alternative resolutions if you are unhappy with the arbitrator’s decision.

The other option is mediation, which is when a trained, third-party individual called a mediator attempts to facilitate a conversation between the two sides that will result in a dispute resolution without having to go to arbitration or litigation. If mediation does not work, the dispute may go to arbitration. Arbitration is faster, less complicated, and less expensive than litigation, so it is the preferred method of dispute resolution when mediation does not work.

Although arbitration is different than litigation, you can and should still have a lawyer with you to ensure your side is fully explained, and you have a fair opportunity to present your side. You want to choose someone that specializes as a FINRA arbitration lawyer like Herskovits PLLC because they will have the knowledge and experience necessary to provide you with the best representation.

FINRA has precise regulations based on declared ethical principles. It is vital to be fully prepared with an understanding of what regulations were violated and in what way. You also want to have an understanding of the intent of the actions that led to the dispute. These are all things your lawyer can help you understand after learning the details of your case. Your lawyer can also provide you with a realistic expectation of the outcome. Knowing your chances before going into the arbitration will allow you to be prepared for the outcome. It may also motivate you to make the mediation process work to prevent the case from going to arbitration.

Regardless of which side of the dispute you are on, it would be best if you had all the facts and documentation prepared. Going into an arbitration unprepared will not bode well for your side of the conflict. You don’t want to risk losing by being unorganized. Your lawyer can help considerably by being prepared for you and preparing you for what is going to happen.

While arbitration is a final decision, the process does not follow the litigation process. You will have ample opportunity to present your side and the documentation you have to support your side of the dispute. While the situation may be stressful, it is crucial to maintain your composure throughout the process. You don’t want to give the arbitrator any reason to believe you are less than credible or impulsive as that assessment may weigh in on their decision.