Must I file an arbitration instead of proceeding in a court case? Why?
Yes. Brokerage firms have customers sign an agreement included within the opening account documents which requires that any dispute be submitted to binding arbitration.
What is an arbitration?
Arbitration is a method of having a dispute between two or more parties resolved by impartial persons who are knowledgeable in securities industry disputes. Those persons are called arbitrators. Arbitration of disputes with broker/dealers has long been used as an alternative to the courts because it is devised as a prompt and inexpensive means of resolving complicated issues. There are certain laws governing the conduct of an arbitration proceeding that must be considered by those planning to use arbitration to resolve the dispute. Most importantly, perhaps, is the fact that an arbitration award is final and binding, subject to review by a court only on a very limited basis.
Who administers the arbitration?
The arbitration is administered by the Financial Industry Regulatory Authority (FINRA). FINRA is the largest non-governmental regulatory authority for all securities firms doing business in the United States. FINRA oversees 4,750 brokerage firms, 167,000 branch offices, and more than 633,000 registered security representatives. FINRA was created through the consolidation of the National Association of Security Dealers (NASD) and the New York Stock Exchange enforcement and arbitration functions. FINRA has about 2,800 employees and 15 District Offices throughout the country.
Where will my arbitration take place?
Under most circumstances, the arbitration will be heard in the nearest major city to your residence.
Who will hear and decide my arbitration?
The number of arbitrators depends on the amount in dispute. Arbitration panels consist of 1 or 3 professionals. For a 1 arbitrator panel, a public arbitrator will be appointed. For a 3 arbitrator panel, 2 are public arbitrators and 1 will be an industry representative. Typically, at least 1 or more of the public arbitrators are attorneys whose practice focuses on the securities area.
How many arbitrations are filed each year before FINRA?
In 2009 there were 7,137 new cases filed before FINRA. In 2008, there were 4,982 cases filed, in 2007 there were 3, 238 cases filed, in 2006 there were 4,614 cases filed, and in 2005 there were 6,074 new cases filed.
How long do these cases take to be resolved?
Typically, the entire process takes about one year from start to finish.
How many of these cases settle?
In 2009, 47% of all cases were settled by the parties, an additional 7% were settled through mediation, and 13% of all claims were withdrawn. The remainder proceeded to decision by the arbitrators.
In what percentage of cases are customers awarded damages?
In 2009, damages were awarded to 45% of customers. This percentage was 42% in 2008, 37% in 2007, 42% in 2006, and 43% in 2005.
What is a reasonable settlement in these matters?
A reasonable settlement is in therange of 50-60% of net out of pocket losses. Each case differs, but arbitrators usually focus on actual net out-of-pocket losses rather than loss opportunity cost or the difference between the high point of the account and the low point of the account. Each case is different, however, and some present compelling reasons for arguing for damages in excess of out of pocket losses.
How much will it cost me to proceed with an arbitration claim?
The Law Offices of Howard B. Prossnitz handles cases on a 1/3 contingent fee and advances the filing cost and other necessary cash disbursements. The typical filing fee is $1,475. Cash disbursements are usually in the range of $2,000 - $5,000. These cash disbursements cover copying costs, expert witness costs, and other associated out of pocket expenditures.
What documents do I need for an arbitration claim?
All customers in arbitration claims are required by FINRA rules to produce certain types of documents. These documents include: statements and other information received from the broker/dealer, federal income tax returns, your resume, and information about any business entity you own or control.
Will I be responsible for any costs if I lost at the hearing and recover nothing?
Yes. In the event that the panel decides not to award any recovery, the panel is likely to assess hearing costs against the claimant. Typically these costs are 1/2 of the total hearing costs and in the range of $2,000 - $3,000 for a 2-3 day hearing.
How do I find more information about the arbitration process?
You can obtain more information by calling the Law Offices of Howard B. Prossnitz at (312) 382-8201. There is no charge for a consultation.
