Arbitration in Securities Law

There are a variety of benefits in choosing arbitration over litigation, and in securities it is no exception. Oftentimes people think that arbitration resembles mediation and that it is not a legitimate form of alternative dispute resolution. That could not be further from the truth. There are rules and procedures in arbitration. In fact, states also regulate mediation and mediators.

Arbitration, however, could be considered one set above mediation and one step below litigation, in that it is not a court room but you do present your case to an arbitrator or panel of arbitrators who listen to your arguments (or your attorney’s arguments, if you choose to hire one) and the other party’s arguments.

The arbitrator or panel of arbitrators will look at and consider all evidence provided to them and may even call in an expert if they deem that necessary to better understand the topic if the arbitrator is not well-versed in that area.

Specifically in securities, the benefits of arbitrating you case are:

1. Arbitration is more peaceful and less adversarial than litigation.
2. It is a faster and less complex way of resolving conflict.
3. It is more cost-effective and can save you significant attorney fees, even if you choose to have an attorney with you during the entire arbitration process.
4. The parties can choose the arbitrator(s).
5. Arbitration is a private and simpler process.

The Financial Industry Regulatory Authority (FINRA), a government-authorized organization, has a Code of Arbitration Procedure. If you decide to go this route, a FINRA arbitrator or panel will listen to both sides, study the evidence, and render a decision, called an award.

The award is final, and binding and all parties must abide by the award. Unlike litigation, arbitration via FINRA or binding arbitration precludes the ability to appeal. However, the award can be challenged in court under very few exceptional circumstances.