What are the Key Parts of the FINRA Arbitration Process?

The FINRA arbitration process consists of the following significant parts:

• Pleadings. To initiate a claim, the investor must file a Statement of Claim. This document tells the story of what happened to the investor. It usually includes a background of the relationship with the broker, the broker’s wrongful conduct, and the damages the investor sustained as a result of the broker’s bad acts. A SOC is often a less formal document than a traditional complaint filed in court, and may have exhibits attached to it designed to help the arbitrators see the full story.
• Selection of arbitrators. Arbitrators are selected through a ranking and striking process. After a Statement of Claim is filed, the parties will receive a list of potential arbitrators with some background information on each arbitrator. The background information includes their education, employment history, and arbitration experience. The parties use this information to rank the arbitrators they would like to have on the panel and to strike the arbitrators they would not like on the panel. FINRA reviews the rankings of both sides and makes a determination as to which arbitrators will be appointed to the panel.
• pre-hearing conference. After the arbitrators have been selected, FINRA will set of a conference call between the arbitrators and the parties to go over the timelines for discovery and to set a date for the final hearing.
• Discovery. Discovery in FINRA arbitration is much more limited than discovery in civil cases in court. Depositions of witnesses are usually not allowed. Discovery primarily focuses on an exchange of documents. FINRA has created rules that require both sides to exchange presumptively discoverable documents. If the parties fail to exchange documents, the arbitrators have the power to sanction the non-compliant party.
• Final evidentiary hearing. The final evidentiary hearing is much like a civil trial. The parties give an opening statement, call fact and expert witnesses, and give closing statements. The rules of evidence don’t apply in arbitration and most arbitrators allow in all evidence and then give it whatever weight they choose. Arbitrators are allowed to ask questions of any witness during the hearing.
• Decision. After the evidentiary hearing is closed, the arbitrators review the facts and evidence presented and make a determination as to the winner and as to the amount of damages awarded. The parties are informed of the decision within 30 days of the date the hearing concluded.

In simplified arbitrations, there is no evidentiary hearing. The arbitrator decides the case based on the written documents.