What Is the Difference Between Arbitration, Trial, and Mediation?
Choose the right forum when investment firms and brokers fail to protect investor interests
Often there is only one forum in which to seek justice when securities fraud or malpractice occurs. However, if the investment contract did not include a mandatory arbitration clause, then a state or federal civil claim may be an option.
The Frankowski Firm explains where claims for broker fraud or negligence must or can be brought. Where there are multiple options, our securities fraud lawyers explain the pros and cons of each type of action. In addition to trying many cases in FINRA arbitrations, our lawyers have tried cases in state and federal court.
What is the difference between arbitration and trial?
Arbitration has some advantages and disadvantages over state or federal court trials. In arbitration:
- Discovery is limited. Each side can request that the other side produce relevant documents. Some of the documents requested in discovery are:
- Risk disclosure documents
- Trading strategy documents
- Documents confirming the investor’s authorization (or lack of authorization)
- Notes and memoranda relating to the creation and management of the account
- Compliance and supervision documents
- Records of phone calls
- Account analyses
- Exception reports
- Internal audits
- Investigations and findings by any regulator, such as the state or federal government, FINRA, or other agency
- Commission reports
- Depositions and interrogatories are generally not allowed. Depositions, or questioning clients and witnesses outside of the courtroom, are common in state and federal trials. Depositions are allowed in limited circumstances in FINRA arbitration.
- Rules of evidence. Because arbitration panels are more informal than jury trials, the strict rules of evidence do not necessarily apply. Arbitrators usually accept all evidence and give it whatever weight the deem appropriate.
- No hearing is required in simplified arbitrations. In simplified arbitrations, the single arbitrator decides the case based on the pleadings and the written submissions.
- The arbitrators do not have to explain their decision. Most court decisions provide a reasoned award that explains the judge’s ruling. FINRA arbitrators are not required to provide such a reasoned award, but the parties can request one if they prefer to have the decision fully explained.
- Appeals are rare. State and federal laws allow appeals from arbitration in very limited circumstances. While many court decisions are appealed by the losing party, most arbitration decisions are simply not appealable.
Our attorneys can help you understand the difference between arbitration and litigation, and help you decide if arbitration is the right choice for your situation.
How does mediation differ from trial or arbitration?
Mediation is a less formal alternative to arbitration. The aim of mediation is to reach an agreement instead of having someone make a formal, binding decision. Mediators are neutral parties whose sole purpose is to facilitate a settlement. The mediator assists the parties in reaching an agreement that is acceptable to both sides. If the parties agree to mediate, they can attempt to resolve their case with this non-binding process. If the case is not settled, their claims will proceed to arbitration.
Learn all your securities dispute litigation options
The Frankowski Firm advises clients that have been injured by stockbrokers, supervisors, or brokerage firms who breached their fiduciary duty, acted fraudulently or negligently, made unsuitable investment recommendations, or proceeded unprofessionally. Most of the claims we bring for our investors are through FINRA arbitration. If a civil court trial is an option, we will pursue those claims in state and federal court. To contact The Frankowski Firm, please call 888-741-7503 or fill out our contact form.