FINRA is the Financial Industry Regulatory Authority. According to FINRA’s website, “FINRA provides the first line of oversight for broker-dealers and the first line of defense for investors by virtue of its comprehensive oversight program. FINRA regulates both the firms and professionals selling securities in the United States and the U.S. securities markets. In this capacity, FINRA writes and enforces its own rules, as well as enforcing federal securities rules and laws.” FINRA is also a forum for arbitration and mediation. Arbitrations and mediations of securities and business disputes may be initiated through FINRA. They are two distinct ways of resolving disputes between and among investors, brokerage firms and individual brokers. FINRA hosts mediations and arbitrations where in FINRA will provide the mediator or the arbitration forum. See FINRA’s website for more detailed information.

Arbitration is an alternative to litigation or mediation in order to resolve a dispute. FINRA’s arbitration panels are composed of one or three arbitrators who are selected by the parties. They read the pleadings filed by the parties, listen to the arguments, study the documentary and/or testimonial evidence, and render a decision. The panel’s decision, called an “award,” is final and binding on all the parties. All parties must abide by the award, unless it is successfully challenged in court within the statutory time period. Arbitration is generally confidential, and documents submitted in arbitration are not publicly-available, unlike court-related filings. However, if an award is issued at the conclusion of the case, FINRA posts it in its Arbitration Awards Online Database, which is publicly available. See FINRA’s website for more detailed information.

Mediation is an informal, voluntary process in which a mediator facilitates negotiations between disputing parties. The mediator’s role is to help the parties find a mutually acceptable solution to the dispute. FINRA’s mediation program offers flexibility, a level playing field, and time and cost savings. Parties control when and where mediation will occur, who will serve as the mediator, and whether they will accept a settlement offer. See FINRA’s website for more detailed information.

FINRA’s website explains how the arbitration process begins with a party, such as an investor, filing a Statement of Claim and other documents with FINRA. The Statement of Claim includes a description of the dispute, the parties involved and the amount of money sought. This is the first chance for an investor to explain clearly the events pertaining to the dispute in chronological order. It is important to provide any documents mentioned in the statement that support the claim. FINRA also requires the filing of a Submission Agreement as part of the initial step in the arbitration process. This agreement lists the parties in the arbitration case and confirms that FINRA is to be the administrator. It also establishes that if the case ends with a hearing, the parties agree to abide by the arbitrators’ decision. FINRA requires that the claimant, the person who files the claim, submit the appropriate fees to start the proceeding. Once the filing requirements are met, FINRA will serve the Statement of Claim on the respondents identified in it. FINRA also analyzes the claim, looking for things like the size of the claim, to decide how many arbitrators will be needed, the nature of the dispute and the type of securities involved. See FINRA’s website for more information and learn how to file a claim for arbitration, and find the appropriate forms. You can file a claim either online or by mail.

FINRA’s website also explains how mediation offers an alternative toarbitra tion. A trained, impartial mediator facilitates negotiations between disputing parties, helping them to find a mutually acceptable resolution to the dispute. If you’re involved in an arbitration case, you can request a mediation at any time before the arbitrators issue an award. To mediate through FINRA, one or both parties may file a Request for Mediation. FINRA will contact the other party or parties to determine their interest, explain the mediation process and seek their agreement to mediate. If the parties agree to mediation, FINRA’s mediation administrators can assist in the selection of a mediator. The parties have full say in and must agree on who is selected as the mediator. Once the parties agree on a mediator, FINRA staff sends each party a Mediation Submission Agreement that indicates the terms for the mediation. All parties, their representatives and the mediator must sign it before the mediation can take place. The agreement is designed to protect the parties involved and prevent any misunderstanding about the process. See FINRA’s website for more information and learn how to request a mediation, and find the required forms. You submit a mediation request either online or by mail.

Ashley Spencer is a licensed attorney with The Spencer Law Firm. The information in this blog is not intended as legal advice but to provide a general understanding of this legal subject. Readers with legal problems should consult an attorney for advice on their particular situation. The Spencer Law Firm offers legal consultation. Please email Ashley Spencer at or call toll free at 1-800- 237-4529.