In FINRA arbitrations, the customer or investor, files a Statement of Claim, which is not required to, but typically looks like a complaint setting forth the relevant facts and legal theories under which the “Claimant” is entitled to relief or the recovery of their damages.
The Brokerage Firm or the Respondent will file an Answer, just as would a defendant in a court proceeding, admitting or denying the allegations in the Statement of Claim, and typically setting forth an alternative statement of the facts, and supporting legal arguments, as to why the customer’s claims are legally or factually flawed, and why the customer claim ought to be denied and that the customer is not entitled to relief of any kind.
Unlike court proceedings where a plaintiff may have its case dismissed for failure to state a claim, or fail to state a claim with the required degree of specificity, including the failure to adequately plead scienter, or dismissed upon summary judgment (based upon the application of the law to uncontroverted facts), where the plaintiff can never get the opportunity to present their case to a jury, motions to dismiss are disfavored in FINRA Securities Arbitration.
In 2009, the FINRA Board of Governors recently approved a proposal to limit significantly the number of dispositive motions filed in its arbitration forum and impose strict sanctions against parties who engage in abusive motions practices.
However, arbitration is very much a legal proceeding. In discovery, parties advance legal reasons or formalistic objections to resist the production of sometimes relevant and important documents. Although the Rules of Evidence are purported not to apply in FINRA arbitrations, Arbitration Panels will often, or at least are supposed to, rely upon well established evidentiary principals.
The Final Hearing
At a final arbitration hearing, the parties make opening statements as to what evidence and testimony will be presented to the Arbitration Panel. The direct testimony and cross examination of witness is presented to the Arbitration Panel. Documents are authenticated and introduced into evidence as exhibits, and at the end of the arbitration hearings, parties make closing statements or summations of the important evidence and the legal theories supporting their side of the case.
Although one is not required to hire a lawyer, or to even be a lawyer, in connection with the prosecution of customer claims in arbitration, arbitration is litigation.
Respondents will hire experienced counsel to escape liability and to prevent a disfavorable award being entered against them, and anyone contemplating bringing any claim in FINRA securities arbitration as a public customer should also hire experienced counsel to navigate the system and to advance their interests in order to obtain a monetary recovery for the wrongful conduct of their broker or investment fiduciary.
Guiliano Law Firm
The Guiliano Law Firm, P.C. is headquartered in Philadelphia, Pennsylvania. Our practice is multi-jurisdictional or national, where permitted by law, and substantially limited to the representation of investors for fraud, the sale of unsuitable investments, breach of fiduciary duty, and other forms of misconduct against brokerage firms, their agents, and other investment professionals.