The Role of a Securities Arbitration Lawyer in Dispute Resolution

There are two ways of handling investment and financial securities-related disputes. One is litigation and the other is arbitration. Litigation involves taking legal action while arbitration is about resolving the dispute outside the court through mediation by an impartial third party panel. Securities arbitration lawyers represent investors, brokers, brokerage firms, etc. in such cases of fraud.
In this blog, let’s discuss what securities fraud is and its implications, securities arbitration, the role and importance of a securities fraud lawyer https://frankowskifirm.com/practice-areas/securities-arbitration/in dispute resolution, and the arbitration process. 

Securities Fraud and Its Implications

Stock and commodities markets are highly sensitive and misleading investors can lead to huge monetary losses. There are some common types of securities fraud as mentioned below – 

• Misrepresentation or Omission of information: Conveying false information to the investor or withholding and not disclosing important information to make an informed decision about a security. 

• Insider Trading: Gathering non-public material information and trading based on it is called insider trading. 

• Churning: When excessive trading is done to generate maximum commissions it is called churning. 

• Ponzi Schemes: When capital from new investors is used to pay returns to the old investors, it is a fraudulent investment operation called the Ponzi scheme. 

Understanding Securities Arbitration

The alternative dispute resolution (ADR) method specific to securities arbitration is all about handling securities transaction conflicts. While courtroom litigation is slow-paced, high-cost, and formal, arbitration is faster, cost-effective, and less formal. In the USA, securities arbitration is administered by the Financial Industry Regulatory Authority (FINRA), which acts as a platform for dispute resolution between investors and brokers. 

The Importance of a Securities Fraud Lawyer

What is the importance of a securities fraud lawyer? As in, why can’t a general lawyer be hired to represent you in a securities fraud case? Let’s try to understand through the following points – 

1. Identifying Fraud: With immense knowledge about the complexities of financial markets, identifying the signs of fraud like irregularities in investment transactions becomes easier as compared to a general lawyer who may not have adequate experience in the same. 
2. Legal Action: Legal proceedings against perpetrators may be in the form of arbitration claims, civil lawsuits, or enforcement actions by regulatory authorities. These securities fraud proceedings require  specialized knowledge and connections with relevant people that a regular lawyer may not have. 
3. Recovering Losses: To recover the losses born by the client, the lawyer would have to negotiate settlements, secure arbitration awards, or get favorable judgments in court. Merely fighting the case does not suffice, specialized knowledge and experience are required to get positive outcomes and recover losses through any of these methods. 
4. Legal Guidance:  Each case is different and so is the course of action to secure a favorable outcome. In order to provide accurate guidance to clients, the lawyer himself must have a deep understanding of the securities fraud domain which will allow the lawyer to provide valuable legal advice.  

The Role of a Securities Arbitration Lawyer

Let’s take a look at the role of a securities arbitration lawyer in dispute resolution of a securities fraud case. 

1. Client Representation: The first role is to represent individual investors or brokerage firms throughout the proceedings to advocate for the client’s interests and seek as much compensation as possible for the losses.

2. Case Evaluation: Evaluating and analyzing the merits of the case such as investment portfolios, transaction records, communication trail between investor and broker, etc. is done by the lawyer to establish whether or not the evidence is sufficient to build a case of securities fraud, breach of fiduciary duty, or unsuitable investment recommendations.

3. Legal Strategy: After thoroughly evaluating the case details, a legal strategy is developed to suit the specific needs of the case. This includes gathering evidence, identifying expert witnesses, and preparing arguments for arbitration hearings. All of this is done keeping in mind the specific circumstances of the dispute.

4. Filing Claims: The statement of claim is a document that describes the allegations and the relief sought by the client. This document is prepared by the arbitration attorney to initiate the proceedings and get settlement on behalf of the client.

5. Discovery Process: In this phase, information and documents relevant to the case are exchanged by both parties – investors and brokers. A lawyer’s role is to request relevant documents from opposing parties, to respond to discovery requests, and ensure compliance with procedural rules.

6. Negotiation and Settlement: A skilled lawyer can resolve the case through negotiation and settlement even before it reaches the arbitration hearing stage. Keeping in mind the client’s best interests, they try to attain a middle ground with the opposing party to avoid spending time and money on a full hearing.

7. Arbitration Hearing: In case a settlement is not reached then the case goes to hearing and the lawyer’s role is to represent the case in front of a panel of arbitrators. The attorney presents evidence, cross examines witnesses, and makes legal arguments to persuade the panel in favor of the client for a positive outcome. 

The Arbitration Process

Lastly, let’s understand in brief the process of arbitration. 

1. Initiation: First step is filing a statement of claim briefing the details of the dispute and the relief requested by the client. 
2. Response: In response, the opposing party presents their side of the case and files an answer to the allegations. 
3. Selection of Arbitrators: Both parties rank and strike candidates to form a panel of arbitrators from the list of arbitrators provided by FINRA. 
4. Discovery: Both parties exchange relevant documents to gather evidence supporting their case. 
5. Pre-Hearing Conferences: These are held to not only schedule hearings and discuss procedural matters but also to negotiate a settlement. 
6. Arbitration Hearing: In case a settlement does not occur, then the case goes to arbitration hearing which includes opening statements, witness testimonies, cross examinations, and closing arguments. 
7. Award: Based on the hearing, the panel of arbitrators issues a written decision known as arbitration award which is binding and enforceable in court. 

Protecting investor’s rights is crucial to maintain the integrity of financial markets and retain trust of the masses in the market. Securities arbitration lawyers play an important role in safeguarding the rights of investors by representing them and resolving disputes in arbitration cases which helps the clients recover their losses. Due to their extensive knowledge and experience in securities fraud cases, securities fraud lawyers – whether through arbitration or litigation – bring the perpetrators to justice which helps maintain accountability in the securities industry. If you ever find yourself in the complex landscape of securities law – either as an investor or as a broker – consult an expert professional to seek a just settlement.