Securities Arbitration

Resolving disputes through arbitration, rather than litigation, has become widespread in the financial services industry. To this end, many investment professionals require their clients to sign arbitration agreements before offering their assistance. Skilled stock fraud attorney Steve A. Buchwalter has over 20 years of experience serving Los Angeles investors who have been burned by their brokers. If you have an upcoming arbitration hearing, you should consider enlisting a lawyer to represent your interests.

Arbitration is a process by which disputes are resolved outside of the civil court system. Without an arbitration agreement, an investor who alleges broker misconduct, such as negligence or misrepresentation, would file suit in state or federal court under Cal. Corp. Code § 25401, SEC Rule 10b-5, or another applicable law. However, litigating cases is usually the least efficient and most expensive way to resolve a dispute, so arbitration is designed to resolve disputes more cheaply and more quickly.

Arbitration resembles an informal trial, with an arbitrator or panel of arbitrators acting as judge and jury. The parties may be represented by a lawyer, and this is usually recommended, even for experienced investors. Brokerage firms will undoubtedly be represented by counsel, and an attorney can help level the playing field for the individuals on the other side.

The Financial Industry Regulatory Authority (FINRA) oversees and regulates securities firms and brokers in this country. Thousands of brokerage firms are members of this organization, which means that their clients are likely subject to its arbitration process. It promulgates special rules that govern the resolution of claims between investors and brokers.

FINRA Rule 12200 requires that a client and financial adviser settle a dispute through arbitration if it is either requested by the investor or required in a written agreement between the parties. Usually, brokers will include this agreement in the paperwork required to open an account. Under the FINRA rules, investors have six years to file a claim. The clock starts ticking from the event that gave rise to the action. An example of such an event is a misrepresentation by the broker about the risk of an investment.

Once the investor files a claim, the parties are given a list of random arbitrators in accordance with FINRA Rule 12400. The parties then strike arbitrators they do not want, they rank the rest, and FINRA constructs a panel of the three arbitrators with the highest combined ranking.

The actual arbitration hearing resembles a civil trial. Each side makes an opening statement, and then the investor and broker present their cases. After closing statements, the arbitration panel makes a ruling. FINRA arbitration rulings are binding.

Since the broker will almost assuredly hire an attorney, it is important for an investor to do the same. An experienced lawyer will not only understand the arbitration process and the applicable law, but he or she will also be experienced in gathering and presenting the evidence in the most persuasive way possible.

Securities arbitration can be complex, and a knowledgeable attorney can help Orange County investors present the strongest possible case to a panel. Broker fraud lawyer Steve A. Buchwalter and his entire staff have actual experience as licensed brokers, giving them a deep, practical understanding of securities law and the arbitration process. For more than 20 years, investors in Newport Beach, Irvine, and throughout Southern California have trusted Mr. Buchwalter to help them resolve disputes with brokers. To schedule a case evaluation, call (818) 501-8987 or visit our contact page.