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The Securities Arbitration Process

Arbitration is a method of having a dispute between two or more parties resolved by impartial persons who are knowledgeable in the areas in controversy. Those persons are called arbitrators. Arbitration of broker/dealer disputes has long been used as an alternative to the courts because it is a prompt and inexpensive means of resolving complicated issues. There are certain laws governing the conduct of an arbitration 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. Parties should recognize, too, that in choosing arbitration as a means of resolving a dispute, they generally give up their right to pursue the matter through the courts.

How Is Arbitration Started?

To begin arbitration, the prospective claimant must file a Statement of Claim and Uniform Submission Agreement.

The Statement of Claim is filed with the Director of Arbitration a typewritten or printed document stating the claim. This document should set forth the details of the dispute, including all relevant dates and names, in a clear, concise, and chronological fashion and should conclude by indicating what relief (e.g., money damages in a specific amount, performance of a particular agreement, interest, etc.) is requested.

The Submission Agreement is provided by the sponsoring organization. By signing the Submission Agreement, the claimant agrees to submit the dispute to arbitration and to abide by the decision (the "award") of the arbitrators. Once a Submission Agreement has been signed, the procedures and timing set out in the Uniform Code become operative and binding. Generally, parties may not withdraw the Submission Agreement and Claim without the consent of either the other parties or the arbitrators.

Do I have to Serve the Other Party?
No, arbitration is unlike court. After the initial Statement of Claim is served by the Director of Arbitration, it is each party's responsibility to provide every other party directly with any further pleadings, motions, or correspondence. In addition, it is each party's responsibility to simultaneously provide sufficient copies directly to the sponsoring SRO for the arbitrators and its files. Service of the filings and correspondence on the sponsoring SRO and the other parties should be made on the same date and by the same means (i.e., via overnight mail, facsimile, etc.)
Where does the hearing take place?
The actual decision as to place of hearing is made by the Director of Arbitration. Arbitrators can be appointed in many of the major urban areas throughout the country, but consideration generally will be given to a number of factors, including the convenience of the parties, the availability of necessary records or witnesses, and the availability of qualified arbitrators. Generally, in public customer cases, the hearing location is close to where the customer resided when the dispute arose regardless of a pre-dispute agreement to the contrary.
Who are the arbitrators?
The proposed panel will be composed of a majority of persons from outside the securities industry. Two members, including the chairperson are public arbitrators and one member of the panel is appointed with an industry background. In employment cases, all three members are selected from the securities industry.
How long does the process take?
The average time from the filing of the Statement of Claim through a final hearing is approximately twelve months. For customers over the age of 65, FINRA has expressed an intention to have arbitrators handled these cases on an expedited basis, thus claims may move the process in less than twelve months. Claims with unique features could take longer.
How long does an arbitration hearing last?
The average hearing time is four to five days.

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