What is FINRA Arbitration?

Arbitration is a contractual process to resolve disputes between parties in a private forum.  Typically, brokerage firms and customers will enter into a contractual agreement before the customer opens their brokerage account.  Most agreements include a provision which compels the parties to resolve certain disputes through arbitration rather than a judicial proceeding such as a lawsuit in a state or federal court.

The arbitration process is not public and imposes significant restrictions on a parties’ ability to conduct discovery, such as document requests and depositions.  Parties also lose the benefit of procedural and due process mechanisms such as appellate review.

In arbitration, a person or group of person is appointed to serve as the arbitration panel.  The arbitrators hear the arguments and review the evidence of all sides and then decides how the matter should be resolved.  Arbitrators are not required to be attorneys.  Finally, arbitration awards issued by arbitration panels are subject to review by a court only on a very limited basis.

What is FINRA Mediation?

FINRA also offers mediation services.  Mediation is a more informal process than arbitration, and it is entirely voluntary.  In mediation, the parties meet with an independent mediator who attempts to resolve the dispute between the parties.  The mediator will discuss the strengths and weaknesses of the claim, discuss potential outcomes, and provide her opinion on the settlement value of the case.  Unlike arbitrators, mediators have no authority decide the matter.