Securities Arbitration

Florida Securities and Investment Fraud and Mismanagement FINRA, AAA, JAMS Arbitration and Litigation Attorney:

Arbitration:

Arbitration is a procedure, much like a trial but less formal. Instead of a decision being made by a judge or jury, an arbitrator hears the evidence and makes a decision. Like a judge, an arbitrator makes rulings on motions, decides the order in which witnesses appear and the testimony they give, and may impose penalties on a party who disobeys the arbitrator's orders. Like a jury, an arbitrator, after hearing the evidence, decides which side wins and which side loses and what the result will be.

Please keep in mind that this discussion is being provided for educational purposes only and is not designed to be complete in all material respects.  Thus, it should not be relied upon as providing legal or investment advice.  If you have any questions concerning its content, you should contact a qualified professional.

Arbitration, as a means of dispute resolution, has been around for a number of years. However, its use has increased substantially in recent years as a result of a long line of cases decided by the United States Supreme Court, which has enforced written agreements to arbitrate based on the provisions contained in the Federal Arbitration Act.

The obligation to arbitrate a dispute usually arises from a contractual agreement between the parties or has been written into the rules and regulations of various self-regulatory agencies such as the Financial Industry Regulatory Authority (FINRA) or the National Futures Association (NFA). Absent an issue concerning waiver of the right to arbitrate, these written agreements are as enforceable as the terms of any written contract.

Pre-hearing, the role of the judiciary relating to matters allegedly encompassed by an arbitration agreement has been generally limited to determining whether or not the dispute falls within the purview of such an agreement and whether a party has waived its right to arbitrate the dispute.  Post-hearing, the judiciary is limited to reviewing an arbitration award based upon the provisions contained within the Federal Arbitration Act or various state statutes that deal with the issue.

Generally, the arbitration agreement will identify the agency that will administer the proceeding, using its rules and regulations. Most privately negotiated arbitration agreements, such as those contained in purchase and sale agreements, shareholder agreements and subscription agreements associated with a private placement, require arbitration before the American Arbitration Association (AAA) or to a less extent JAMS. Each of these associations has established procedures, in place, for the administration of disputes submitted to them.

The arbitration agreements used by brokerage firms, in the preprinted customer agreements that clients of the firms are asked to sign, frequently contain arbitration agreements that require that disputes between the customer and the firm be submitted to the arbitration arm of the self-regulatory agency that the firm is licensed with. So that if you are dealing with a securities firm, you will be required to arbitrate your dispute with FINRA and, if you are dealing with a commodity futures merchant, you will be required to arbitrate with the NFA. As with the AAA or JAMS, these forums have their own rules and regulations that must be followed during the arbitration process.

The arbitration agencies set forth above are by no means the exclusive forums available for dispute resolution. There are any number of dispute resolution associations that can be chosen. For this reason, it is very important for a customer or an investor, in any transaction, to review the arbitration agreement that you are being asked to sign and the rights and duties associated with it. Having to arbitrate in an unfriendly environment, with an association chosen by the other side in the transactions, with rules that you are unfamiliar with, in an inconvenient location can led only to disaster without the assistance of qualified counsel.

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