Documenting Your Arbitration Case

Virtually all brokerage houses now require their customers to agree to arbitration instead of going to court. This requirement is contained in the agreement you sign when opening a new account.

Most claims against a broker or brokerage firm are subject to arbitration because of the arbitration clause that is a part of virtually all new account forms that one fills out when signing up with a brokerage firm.

If there was no arbitration agreement, the investor can bring a claim in court in a civil tort action, although he or she may prefer arbitration in those situations also.

Most arbitrations are conducted by the Financial Industry Regulatory Authority (FINRA) or the New York Stock Exchange (NYSE). Your lawyer can help you decide which arbitration forum to choose when making your initial claim.

The details of the arbitration may be spelled out in the agreement. Be sure to read the agreement and keep a copy for your records.

Do you need a lawyer in an arbitration proceeding?

The SROs do not require that claimants be represented by lawyers. The process is designed so individuals without legal training can make claims and follow them through the arbitration process.

Investors have the option of hiring professional counsel to represent them and guide them in the arbitration process. Consider retaining an attorney if any of the following apply to your case.

  • The amount of money lost (or amount of your claim) exceeds $15,000
  • The incidence of wrong-doing can be covered up
  • You file against more than one respondents
  • The case is particularly complex

Professional counsel can benefit the investor in many ways. The first is experience. Even the most savvy investors and business people have probably not been through a securities arbitration process before. An experienced securities arbitration lawyer has been through it, and has thorough knowledge of the procedures required. The lawyer has prepared cases for both arbitrations and court trials and knows how to build a case that will stand up to scrutiny.

Also, the respondent may be less likely to take the claimant seriously if there is no lawyer involved on the part of the claimant. Further, in the unlikely event that you need to challenge the arbitration in a court, you will need a lawyer to represent you there, and a if your lawyer is intimately familiar with the case through the arbitration hearing he or she can avoid much of the ordinary preparation time.

Large respondents may use in-house counsel in arbitration hearings, or they retain firms who have represented them in other cases. Any brokerage of any size will doubtlessly use a licensed lawyer in the arbitration, so even if your case is air-tight, you may wish to consider retaining a lawyer also.

Finding a securities lawyer

It is generally best to hire a lawyer that specializes in securities law and investor protection. An experienced attorney has prepared arbitration cases before, and he or she is familiar with the process. Some law firms employ former brokerage employees or regulatory agency employees, so they have intimate industry knowledge. Some firms represent both sides while others represent only investors.