When disputes arise between investors and their brokers or brokerage firms, most cases are resolved through FINRA arbitration rather than traditional court litigation. The Financial Industry Regulatory Authority (FINRA) operates the largest securities dispute resolution forum in the United States, handling thousands of cases annually.
FINRA arbitration is a formal dispute resolution process designed specifically for securities-related conflicts. Think of it as a private courtroom where investment disputes are heard by experienced arbitrators rather than judges or juries. This system was created to provide investors with a faster, less expensive alternative to traditional litigation.
Most brokerage account agreements include mandatory arbitration clauses, meaning you likely agreed to resolve disputes through FINRA arbitration when you opened your account. While this removes your right to sue in court, the arbitration process offers significant advantages for investors seeking recovery.
FINRA arbitration addresses a wide range of investment-related disputes:
Your broker made trades in your account without your permission or knowledge.
Your financial advisor recommended investments that didn't match your risk tolerance, investment objectives, or financial situation.
Excessive buying and selling in your account to generate commissions rather than profits for you.
Your advisor lied about or failed to disclose important facts about investments.
Your advisor put their interests ahead of yours, violating their legal obligation to act in your best interest.
Deliberate deception or manipulation designed to separate you from your money.
Understanding the process helps remove the intimidation factor and empowers you to take action.
The process begins when you file a Statement of Claim with FINRA, detailing your dispute, the damages you've suffered, and the relief you're seeking. You'll pay a filing fee based on the amount of your claim. This document becomes the foundation of your case.
Unlike court cases with a single judge, FINRA arbitration typically involves a panel of three arbitrators for claims over $100,000, or a single arbitrator for smaller claims. You'll participate in selecting these arbitrators from FINRA's roster of qualified professionals. The panel usually includes a mix of industry professionals and public arbitrators to ensure balanced perspective.
Both sides exchange relevant documents and information. This phase allows you to obtain account statements, trading records, correspondence, and other evidence from your broker or firm. Your attorney can request documents, take depositions, and gather the evidence needed to prove your case.
The arbitrators may hold conferences to address procedural matters, narrow the issues in dispute, and encourage settlement discussions. Many cases settle during this phase once both sides understand the strength of the evidence.
BotIf settlement isn't reached, your case proceeds to a hearing that functions similarly to a trial. Both sides present evidence, call witnesses, and make arguments. Your broker or firm will defend their actions. The hearing can last anywhere from a single day to several weeks depending on complexity. Unlike court proceedings, arbitration hearings follow more relaxed rules of evidence, making it easier to present your case.
After considering all evidence and arguments, the arbitration panel issues a written award, typically within 30 days of the hearing's conclusion. The award states whether you've won, the amount of damages awarded, and how costs are allocated. FINRA arbitration awards are final and binding—there's no appeal process except in very limited circumstances involving fraud or arbitrator misconduct.
FINRA arbitration generally takes 12 to 16 months from filing to award, significantly faster than traditional litigation which can drag on for years. Filing fees range from $50 for small claims to $2,400 for claims over $10 million. Additional hearing session fees apply, typically shared between parties.
Many investors work with attorneys on a contingency basis, meaning your lawyer only gets paid if you recover damages. This arrangement makes it possible to pursue justice without upfront legal costs.
FINRA arbitration statistics show that investors win some or all of their requested damages in approximately 42% of cases that go to hearing. This success rate increases significantly when investors are represented by experienced securities attorneys who understand the process and know how to present compelling cases.
Settlement negotiations resolve many additional cases before reaching the hearing stage, often resulting in recovery for investors without the time and stress of a full hearing.