Many brokerage firms require new clients to sign agreements stipulating that any claims against the firm must be settled in arbitration. These agreements legally prevent clients from bringing claims against the firms in a court.
Even if your brokerage contract does not require that you settle issues in arbitration, many people choose arbitration over a court trial, either as an initial attempt to resolve their claim, or as a binding final agreement.
The Arbitration Process
Arbitration can be a lengthy process, with cases frequently resolved six months to a year following the initial filing.
The arbitration process consists of several discrete steps:
- Filing a claim. The first step is to file a claim with the National Association of Securities Dealers (NASD) or the New York Stock Exchange (NYSE). These bodies govern the conduct of licensed brokers and brokerages. This claim will provide the basis of your case, outlining your claims against the broker and any supporting evidence you have.
- Response. Once this claim is filed, the governing body will forward it to the broker, who will be allotted a specified amount of time to submit an official response to your claims.
- Discovery. After both sides have submitted their accounts, the next step is what is known as the discovery process. During this stage, both you (the claimant) and the broker (the respondent) can request information and evidence from the other party that is relevant to the case.
- Hearing. Once this discovery phase is complete, you and your broker will be scheduled for the arbitration hearing itself. During this process, each of you will present your case, and any supporting evidence, to a panel of impartial expert arbitrators consisting of three people—two public arbitrators who are not affiliated with the securities industry, and a third arbitrator with expert knowledge of securities. This panel will hear argument and review evidence from both sides of the case, and then arrive at a final judgment in the case. This judgment is binding to both parties.
Arbitration cases can be heard for a wide range of securities fraud claims including:
- Churning
- Unauthorized trading
- Lack of suitability
- Overconcentration
- Misrepresentations and omissions
- Annuity fraud
Help With the Arbitration Process
Although an arbitration differs from a court trial, it is still important to seek competent, experienced legal counsel before attempting to file a claim for arbitration. An experienced securities attorney in your area can help you assess your case, gather the documentation and other evidence you need, and make your case in arbitration as effectively as possible.
And as with court actions, your right to bring a securities fraud claim to arbitration may be limited, so it’s important that you speak to an attorney as soon as possible.
