What Is FINRA
There are a number of different federal and state regulatory agencies that oversee the financial sector, but there are also number Self-Regulatory Organizations or SROs. These organizations are non-government agencies with the power to create and enforce industry regulations. The mission of these organizations is to establish a set of ethical laws to protect investors.
The largest and perhaps most powerful of these organization is the Financial Industry Regulatory Authority (FINRA). FINRA, like other SROs, is not connected to federal or state governments. It is an independent non-profit organization and its mission is to protect investors from the potentially fraudulent or dishonest practices finance professionals may commit. FINRA’s impartiality also promotes integrity throughout the stock market.
Many financial adviser agreements contain a clause that requires investors to use FINRA arbitration proceedings to resolve any disputes that may occur. While the arbitration process is not the same as a lawsuit, individuals often seek out the advice and representation of investment attorneys who specialize in FINRA arbitration.
They read each side of the case, listen to arguments, explore the evidence, and offer an award or outcome. In FINRA arbitration proceedings, and most other arbitration proceedings, the award is a legally binding and final decision.
The parties can choose to take the decision to court to appeal if, the arbitrator(s) failed to uphold their legal duties, if it appeared they reached their decision because of duress, fraud, or corruption, or if their decision was completely irrational.
When To File
It’s vital to act quickly when filing your claim, otherwise you risk falling outside the statute of limitations, the time limit for filing legal actions. Speak with your attorney to determine which statutes of limitations apply to your situation.
You’ll start the arbitration process by filing a Statement of Claim with FINRA. After that your case will be transferred to a regional office near your location. FINRA will then assign an arbitrator to your case.
FINRA will serve the Statement of Claim for your case to all of the respondents listed in your claim and the opposition. Next it will notify all parties of the initial hearing location and date. FINRA does not serve any motions, pleadings, or correspondence after this point. You and the other parties involved must file these documents through FINRA’s online portal. All respondents have 45 calendar days to respond to filed claims.
Do I Need An Attorney?
The FINRA arbitration process requires precise communication, exacting timeframes, and thorough investigations. Most investors who file a claim against an advisor or advisement firm are not prepared to handle the legal considerations of the claim. An attorney can help claimants identify additional acts of misconduct or fraud, meet documentation submission timeframes, and protect claimants from defenses against misconduct. Most respondents will hire an attorney to protect their professional interests. Claimants may increase their ability to secure a successful resolution if they retain legal counsel.
For an investor, FINRA’s services are there as an oversight to protect them, but during arbitration they act as a neutral venue for investment disputes. Though the arbitration is through FINRA, an investor would benefit greatly by working with a skilled attorney who understands investment law during the proceedings. In such cases a FINRA attorney will work to protect your rights and facilitate the claim filing, discovery process, and hearing.
Arbitration claims commonly involve negligence, risk misrepresentation, breach of fiduciary or contractual duties, unsuitability, churning, and unauthorized trading.