Frequently Asked Questions About
Securities Arbitration
- Why must I file an arbitration instead of proceeding in a court case?
- Who administers the arbitration?
- Where will my arbitration be heard?
- Who will hear and decide my arbitration?
- How many arbitrations are filed each year before FINRA?
- How long do these cases take to be resolved?
- How many of these cases settle?
- In what percentage of cases are customers awarded damages?
- What is a reasonable settlement in these matters?
- How much will it cost me to proceed with an arbitration claim?
- Will I be responsible for any costs if I lose at the hearing and recover nothing?
- Where can I find out more information about the arbitration process?
- Why must I file an arbitration instead of proceeding in a court case?
-
Brokerage firms have customers sign an agreement included within the opening account documents which requires that any dispute be submitted to binding arbitration.
(back to top)
-
-
Who administers the arbitration?
- The arbitration is administered by FINRA, which is short for the Financial Industry Regulatory Authority. FINRA is the largest non-governmental regulatory authority for all securities firms doing business in the United States. FINRA oversees 5,000 brokerage firms, 172,000 branch offices, and more than 676,000 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 3,000 employees and 15 District Offices throughout the country.
(back to top)
- The arbitration is administered by FINRA, which is short for the Financial Industry Regulatory Authority. FINRA is the largest non-governmental regulatory authority for all securities firms doing business in the United States. FINRA oversees 5,000 brokerage firms, 172,000 branch offices, and more than 676,000 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 3,000 employees and 15 District Offices throughout the country.
-
Where will my arbitration be heard?
- The arbitration will be heard in the nearest major city to your residence under most circumstances.
(back to top)
- The arbitration will be heard in the nearest major city to your residence under most circumstances.
-
Who will hear and decide my arbitration?
- The arbitration panel will consist of 3 professionals, two of whom are public arbitrators and one of whom will be an industry representative. Typically, at least one or more of the public arbitrators are attorneys whose practice focuses on the securities area.
(back to top)
- The arbitration panel will consist of 3 professionals, two of whom are public arbitrators and one of whom will be an industry representative. Typically, at least one 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 2005 there were 6,074 new cases filed, in 2006 there were 4,614 cases filed, and in 2007 there were 3,238 cases filed.
(back to top)
- In 2005 there were 6,074 new cases filed, in 2006 there were 4,614 cases filed, and in 2007 there were 3,238 cases filed.
-
How long do these cases take to be resolved?
- Typically, the process from start to finish is about one year.
(back to top)
- Typically, the process from start to finish is about one year.
-
How many of these cases settle?
- In 2007, 57% of all cases were settled by the parties, an additional 9% were settled through mediation, and 7% of all claims were withdrawn. The remainder proceeded to decision by the arbitrators.
(back to top)
- In 2007, 57% of all cases were settled by the parties, an additional 9% were settled through mediation, and 7% of all claims were withdrawn. The remainder proceeded to decision by the arbitrators.
-
In what percentage of cases are customers awarded damages?
- In 2005 customers were awarded damages in 43% of cases, in 2006 this number was 43%, and in 2007, 37% of claimants were awarded damages.
(back to top)
- In 2005 customers were awarded damages in 43% of cases, in 2006 this number was 43%, and in 2007, 37% of claimants were awarded damages.
-
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 panels 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. Once again however, some cases differ and some present compelling reasons for arguing for damages in excess of out of pocket losses.
(back to top)
- A reasonable settlement is in therange of 50-60% of net out of pocket losses. Each case differs, but panels 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. Once again however, some cases differ 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 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.
(back to top)
- The Law Offices of Howard 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.
-
Will I be responsible for any costs if I lose 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 would be 1/2 of the total hearing costs and in the range of $2,000 - $3,000 for a two to three day hearing.
(back to top)
- 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 would be 1/2 of the total hearing costs and in the range of $2,000 - $3,000 for a two to three day hearing.
