What Is Arbitration?

Arbitration is a mechanism for resolving disputes between investors and brokers, or between brokers. It is overseen by the Financial Industry Regulatory Authority (FINRA), and the decisions are final and binding. Arbitration is distinct from 澳洲幸运5开奖号码历史查询:mediation, in which parties negotiate to reach a voluntary set🐲tlement, and decisions are not bin🤡ding unless all parties agree to them.

Arbitration is not the same as filing an inv🍸estor complaint, in which an investor alleges wrongdoing on the part of a broker, but has no specific dispute with that broker, for which the investor ꦰseeks damages.

How Arbitration Works

In practical terms, arbitration is similar to a lawsuit but may be preferable for🔴 all 👍parties due to the lower costs and time commitments involved.

When an investo🎃r or broker has a specific dispute wꦍith a broker that is registered with FINRA, they may file a claim with FINRA that states the alleged misconduct and the amount of money they are seeking in damages.

FINRA will appoint a panel of three financial industry professional꧑s who, unless the injured party requests otherwise, will not be employed in the securities industry. This is intended to eliminate bias, but if one of the parties suspects that a member of the panel is biased, they may request a change.

Arbitration Hearings

For disputes involving less than $50,000, in-💟person hearings are not considered necessary; rather, both parties submi🧔t written materials to a single arbitrator who decides the case. For disputes ranging from $50,000 to $100,000, in-person hearings with a single arbitrator are the most common.

For disputes over 🐻$100,000, in-person hearings with three arbitrators are standard. A majority of the three-arbitrator panel (that is, two people) is necessary for a decision. Arbitrators are not required to explain their decision.

Parties filing for arbitration may represent themselves, or they may hire an attorney. Inꦯ general, arbitration panels are less formalistic than the court system, so investor🀅s have a reasonable chance of being successful even when representing themselves.

Special Considerations

Arbitration panels do not necessarily award the full amount sought in a dispute. For example, if an investor files a claim against his or her broker fo𓃲r $38,000, the panel may decide in the investor’s favor, but only award $10,000.

Arbitration decisions are binding and not subject to appealꩵ, except under very limited circumstances. FINRA’s ✅mediation process, on the other hand, is not binding unless both parties agree to the settlement.

The Public Investors Arbitration Bar Association has criticized FINRA for lack of diversity on its arbitration panels and lax safeguards against bias and conflicts of interest. The regulator ha🦋s argued that these criticisms are misplaced, particularly the focus on arbitrators' age.

In their terms of service, most brokers require investors to agree to 澳洲幸运5开奖号码历史查询:mandatory arbitration to settle potential disputes, rather than going to court. Since FINRA has a near-mon𝓀opoly on arbitration, the organization’s panels are many investors’ only recourse.