Securities Arbitration - Frequently Asked Questions

Are you aware that there is an arbitration process that allows you to seek recovery of your investment losses, and that attorneys may be able to represent you on a contingency fee basis?

What is Securities Arbitration?

Arbitration is a way for parties (the investor and the financial adviser) to resolve disputes outside of the court system by bringing their dispute before neutral third-party individual arbitrators. Arbitrators are often former judges or experienced lawyers. An arbitration claim may settle without the need for an arbitration hearing. If a hearing is needed, it normally will take place in an office building or hotel in the largest city closest to the investor's home. At the hearing, each side (the investor and the financial adviser) presents its case.

Why Arbitration?

  • Usually cheaper than litigation. The process generally is less complicated than a court proceeding.
  • Faster than litigation. It generally takes about 1 year. "According to a recent study by the Federal Mediation and Conciliation Services, the average time from filing to decision was about 475 days in an arbitrated case, while a similar case took from 18 months to three years to wend its way through the courts." (Source
  • Simplified rules of evidence and procedure. Arbitration dispenses with court-applied rules of evidence and procedure.
  • Flexible. Unlike trials, arbitration hearings usually can be scheduled around the availabilities of the parties involved.
  • Private. Arbitration proceedings are generally held in private and, should there be a settlement, the parties may agree to keep the proceedings and terms of the final resolution confidential.
  • Binding arbitration clause. Depending on the new account agreement an investor signed, arbitration may be a contractual requirement to resolve disputes through administrators such as FINRA (Financial Industry Regulatory Authority), AAA (American Arbitration Association) or JAMS (Judicial Arbitration and Mediation Services).

How Much Can Be Recovered in Arbitration?

In addition to recovery of the funds lost, an investor may be entitled to attorney fees, interest costs and punitive damages. Of course, there are no guarantees in arbitration (or litigation).

Time is of the essence. You must take legal action promptly or you may lose the right to seek a remedy or recover funds. Time restrictions, called "statutes of limitations", vary from state to state. You generally cannot pursue an issue through arbitration if it is more than six years old. However, in those cases, there may be opportunities to litigate your claims in court.

To learn much more about securities arbitration for investors, CLICK HERE to view Jim Eccleston's continuing education podcast teaching attorneys.


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