Q. What is FINRA?
FINRA stands for “Financial Industry Regulatory Authority.” It is a nationwide organization that regulates securities broker-dealer firms and their stockbrokers. It has enacted a substantial body of rules and regulations that govern the conduct of broker-dealer firms and stockbrokers in the course of their securities business. When stockbrokers and their employers sell securities or make investment recommendations to the public, they must abide by those conduct rules.
FINRA functions under the auspices of the United States Securities and Exchange Commission. Securities broker-dealer firms and their stockbrokers are required to arbitrate disputes with their customers in the arbitral tribunals organized by FINRA, rather than in a court of law.
Q. What is FINRA arbitration?
FINRA arbitration is an arbitration process that takes place before panels of three arbitrators, organized by FINRA and in accordance with the FINRA Code of Arbitration. Arbitration in general is an alternative dispute resolution process. It is an alternative to state or federal court litigation.
FINRA arbitrations are private (not open to the public) and are generally faster and less expensive than a lawsuit in state or federal court. The FINRA arbitration process has some similarities to a typical lawsuit in state or federal court: it starts with a “Statement of Claim” filed by the parties seeking relief (compensation) and an “Answer” filed by the party that was “sued.” The parties then participate to the arbitrator selection process, subsequently schedule the hearing and other important deadlines in the case, and thereafter engage in the discovery process. The discovery process is much simplified compared to that in state or federal court. Among other things, it does not allow depositions.
The evidentiary hearing typically takes place between 12-18 months from the date of the filing of the Statement of Claim, though such terms may vary. At the hearing, a panel comprised of three professionals is presented with the evidence and hears the parties’ arguments. Typically within 30 days after the hearing, the panel issues an “Award” (decision). The FINRA arbitration awards are, with some exceptions, non-appealable.
Q. What is a FINRA arbitration “group case”?
In certain types of matters, such as Ponzi schemes or investment fraud, where investors are victimized by the same stockbroker or broker-dealer firm, we often include multiple investors in the same FINRA arbitration proceeding. We do that when we determine that they are similarly situated in the material respects, meaning that their relevant investment circumstances and their claims are similar.
While we make this determination for each individual matter, our experience is that it is generally in our clients’ interest to group their claims in the same proceeding. On one hand, there is strength in numbers in proceedings of this type; on the other hand, when the expenses are spread over a larger number of clients, each client’s share of such expenses is reduced. Yet another reason is that proceedings are more efficient and time-effective when multiple, similarly-situated investors are grouped in the same arbitration. We avoid duplicating discovery requests, motion practice, and various hearings.
Q. Can investors victimized by a fraudulent investment (Ponzi) scheme participate in FINRA arbitration proceedings and also in bankruptcy or receivership proceedings?
Yes. The purpose of the receivership or bankruptcy proceedings is to recover money for investors from the fraudulent scheme and/or its perpetrator, and their assets. The goal of the FINRA arbitration proceedings we initiate for our clients is to recover money for those clients who participate in the case, from third parties we believe are liable for our clients’ losses.
Q. If an investor was referred to a fraudulent investment scheme by a financial professional, can he or she simply wait for your case to be over in order to receive a check?
No. We will only be able to represent those investors who sign up with us, become our clients, and enter into an attorney-client relationship with us. We can only initiate FINRA arbitration proceedings on behalf of our clients, and will only be able to recover money for them, assuming we are successful.
Q. Can an investor sign up with more than one law firm to represent him or her in cases against those securities broker-dealer firms?
No. An investor can only sue the same party in one proceeding.
Q. If an investor recovers money from the fraudulent scheme’s bankruptcy or receivership, does he or she have to pay you a fee for that money?
No. We will only represent investors in the FINRA arbitration proceedings we file, not in any other case, such as bankruptcies or receiverships. We only get paid for money we recover from our clients, not for money the clients recover from other cases, in which we do not represent them.
Q. Do investors who participate to the FINRA arbitration case have to attend the arbitration proceedings?
The only FINRA arbitration proceeding those investors will have to attend is the evidentiary hearing at the end of the matter.
Q. Why should an investor sign up with your firm to represent him or her in an investment fraud case?
Selecting a lawyer is an important decision that should be the result of serious consideration. We encourage investors to ask a lot of questions to educate themselves as to their case, and sign up with the law firm with which they feel most comfortable.
Our law firm has the size, resources, and experience to represent groups of investors in complex securities cases against large financial institutions.
Please note that these questions are for informational purposes only. They do not, and cannot represent legal advice since they are not provided in response to any individual investor’s particular situation and do not represent our evaluation of any investor’s particular case. Keep in mind that each case is different and influenced by a multitude of factors outside of your or your lawyer’s control. No lawyer can ever guarantee the outcome of a case.