FINRA Arbitration

In July 2007 the New York Stock Exchange (“NYSE”) and the National Association of Securities Dealers (“NASD”) regulatory bodies merged to form the Financial Industry Regulatory Authority (“FINRA”).

Customer agreements for virtually all margin accounts, option accounts, and even many cash accounts with brokerage firms contain predispute arbitration clauses.

Although arbitrators are not strictly bound by the law, they must follow it to the best of their ability. The decision of the arbitrators is binding upon the parties and there are very limited grounds upon which to vacate (void – nullify) an award.  Arbitrators are not required to and generally do not state their reasoning in determining an award.

Discovery procedures are more limited in arbitration than in litigation. Generally, the strict rules of evidence do not apply in arbitration hearings. FINRA has created lists of documents each party must produce. Following is a link to FINRA’s website outlining the document production guidelines. FINRA Document Guidelines

Discovery in arbitration is intended to be a voluntary exchange of documents and information; however, when one party fails to comply with a request, the requesting party may ask for a prehearing conference during which the arbitrators rule on discovery disputes.