Why Properly Ranking Your Arbitrators is Important in FINRA Arbitrations
While working as a financial adviser for Wells Fargo in Florida, Paul Zoch has been accused of helping to lure investors into a fraudulent movie financing scheme and of mishandling other clients’ funds. For Wells Fargo, the movie scam and other charges are merely the...read more
When you seek arbitration through FINRA, there are no judges or juries involved like in a court case. Instead, an arbitrator or a panel of arbitrators decide your case. In a trial, you rarely get any say in choosing the judge, but you and your attorney are allowed to participate in jury selection. Similarly, victims of financial negligence and investment fraud get some leeway to choose their arbitrators during FINRA arbitration. The FINRA arbitration attorneys at Epperson & Greenidge, LLP explain why ranking and selecting your arbitrators is important for any FINRA case.
How Arbitrator Selection Works in FINRA Cases
When you file a case against your financial advisor or stockbroker, it is usually handled through arbitration instead of a lawsuit. In arbitration, cases are heard by arbitrators rather than judges. When they decide your case, the verdict is binding, and your advisor and/or the affiliated firm is required to pay any damages the arbitrators decide in your favor.
Both parties get some control over which arbitrators will hear their case. A single arbitrator hears any case worth $50,000 or less; usually a single arbitrator will hear a case worth $50,000 to $100,000 – unless all sides agree (in writing) to a panel of three arbitrators; and a panel of three arbitrators hears cases worth more than $100,000 – or cases where the amount of losses is unspecified. These arbitrators are assembled into a list of potential arbitrators available to hear your case, and you get a chance to strike arbitrators from the list and rank the remaining arbitrators by order of preference.
When your case has one arbitrator, FINRA will give both sides a list of 10 potential arbitrators. Every party involved in the case gets a chance to strike 4 of the 10 options and rank the remaining 6 arbitrators in order of which one they would prefer to hear the case. FINRA will look at which arbitrators were stricken and decide which one will hear your case based on the combined preferences.
When your case has a panel of arbitrators, each party gets three lists of arbitrators. The first list has “10 chair-qualified public arbitrators,” the second has “15 public arbitrators,” and the last has “10 non-public arbitrators.” Each party gets 4 strikes for the chair-qualified list of 10, 6 strikes for the public list of 15, and 10 strikes for the non-public list of 10. This means that you can reduce the list to 6 chair-qualified arbitrators, 9 public arbitrators, and 0 non-public arbitrators. (Although, for strategic reasons, it may be wise to not exercise all of your available strikes.)
Once you have finished exercising your “strikes,” you then rank the remaining arbitrators on each list, meaning you end up with 3 lists of preferences. FINRA handles the rest to determine who will hear your case.
Benefits of Ranking Arbitrators for FINRA Arbitration
Selecting your arbitrator(s) is always critical in FINRA cases. If the arbitrator who hears your case is unsympathetic to your cause, tends to favor brokers over investors, or has a history of ruling against investor claims, your case could be set up to fail. Additionally, some conflicts of interest may make certain arbitrators patently unfair choices. For instance, if the broker-dealer you are filing a case against works for the same investment firm as the arbitrator, that conflict may make them more likely to rule against you. When creating the initial list, FINRA works to eliminate most of these issues, but some get through.
It is important to understand your options when selecting your arbitrator(s). Public arbitrators are often trained in arbitration and mediation, and they are typically lawyers. Chair-certified arbitrators are lawyers that have previously served as arbitrators for other self-regulatory boards, but they may not have specialized financial or investment knowledge. Non-public arbitrators, instead, are financial industry professionals. These individuals have backgrounds and experience in investing and the financial industry that gives them deeper insight into the cases they will be handling as FINRA arbitrators.
When you select an arbitrator, you want someone who will be fair and reasonable. Selecting a chair-certified arbitrator ensures that they have the experience necessary to handle arbitration. However, complex arbitration dealing with high-level investing rules and practices could benefit from having a specialized investment professional making the decisions. This could make choosing a non-public arbitrator important, in some cases.
The number of strikes each side gets is purely for strategy/preference. Both sides get additional chances to strike patently unfair arbitrators for good cause, such as when the arbitrator:
- Has conflicts of interests because they previously worked with or had business dealings with one of the parties
- Has an opinion or bias against a party
- Has a personal relationship with a party
- Has a financial interest in the outcome
- Was personally involved in the issue
- Previously acted as an expert witness in prior cases involving either party
All parties get the chance to strike any arbitrator that has one of these issues or conflicts.
FINRA Arbitration Lawyers Offering Free Consultations
If you or a loved one was harmed by a financial broker or investment professional, talk to a FINRA claims lawyer today about filing an arbitration claim against the broker-dealer. The attorneys at Epperson & Greenidge, LLP understand which arbitrators to strike and what order you should rank the remaining arbitrators to help maximize your chances of winning your case. For help with your claim, contact our law offices today at (877) 445-9261.