Answers to Your Frequently Asked Questions
An aggrieved investor has two possible avenues toward recovery of their investment losses: a class action lawsuit or an individual arbitration claim. The investor should consider carefully which forum best represents their interests and provides for a greater likelihood of success.
Class actions are typically filed by attorneys seeking to represent a large group of investors who suffered a common wrong or purchased the same investment. A group of attorneys or a law firm represents all parties regardless of the particular requirements of the individual investor. Often classes are represented by the investor with the largest claim at stake. This usually means that state pension funds or institutional investors have the most clout in choosing the attorneys and working on the strategy of the case. In many cases the recoveries to the individual investor are pennies on the dollar through these types of lawsuits.
Class actions can and do serve an important place in securities litigation. For example, where an individual loss is so small that one investor may not have an economic interest in pursuing the case. However, investors that have lost more than $50,000 should strongly consider pursuing their rights on an individual basis through arbitration.
Arbitration before FINRA is done on an individual basis. The investor has direct input in the selection of counsel and participates in the litigation of the case. Individual representation is also a better method of ensuring that conflicts of interest do not exist between multiple clients that a law firm represents and that individual investors receive specific counsel relative to their claims. Arbitration cases provide for much more involvement from the investor in how their case progresses. Additionally, securities arbitration is a superior forum to seek damages that exceed out of pocket losses, interest, and attorney fees.
Griffin Law Firm welcomes the opportunity to discuss these issues with investors on an one-to-one basis. Please call with any questions you may have regarding the differences between class action lawsuits and individual arbitration cases.
Arbitration is a method of resolving a dispute between two or more parties by impartial persons knowledgeable in the areas in controversy. Those persons are called arbitrators. Arbitration of broker/dealer disputes has long been used as an alternative to the courts because it is a prompt and inexpensive means of resolving complicated issues. There are certain laws governing the conduct of an arbitration that must be considered by those planning to use arbitration. Most important, perhaps, is that an arbitration award is final and binding, subject to review by a court only on a very limited basis. Parties should recognize, too, that in choosing arbitration as a means of resolving a dispute, they generally give up their right to pursue the matter through the courts.
To initiate arbitration, the prospective claimant must file a Statement of Claim and Uniform Submission Agreement.
The Statement of Claim is filed with the Director of Arbitration via a typewritten or printed document stating the claim. This document sets forth the details of the dispute, including all relevant dates and names, in a clear, concise, and chronological fashion. It concludes by indicating what relief (e.g., money damages in a specific amount, performance of a particular agreement, interest, etc.) is requested.
The Submission Agreement is provided by the sponsoring organization. By signing the Submission Agreement, the claimant agrees to submit the dispute to arbitration and to abide by the decision (the “award”) of the arbitrators. Once a Submission Agreement has been signed, the procedures and timing set out in the Uniform Code become operative and binding. Generally, parties may not withdraw the Submission Agreement and Claim without the consent of either the other parties or the arbitrators.
No, arbitration is unlike court. After the initial Statement of Claim is served by the Director of Arbitration, it is each party’s responsibility to provide every other party directly with any further pleadings, motions, or correspondence. In addition, it is each party’s responsibility to simultaneously provide sufficient copies directly to the sponsoring SRO for the arbitrators and its files. Service of the filings and correspondence on the sponsoring SRO and the other parties should be made on the same date and by the same means (i.e., via overnight mail, facsimile, etc.).
The actual decision as to place of hearing is made by the Director of Arbitration. Arbitrators can be appointed in many of the major urban areas throughout the country, but consideration generally will be given to a number of factors, including the convenience of the parties, the availability of necessary records or witnesses, and the availability of qualified arbitrators. Generally, in public customer cases, the hearing location is close to where the customer resided when the dispute arose.
The proposed panel will be composed of a majority of persons from outside the securities industry. Two members, including the chairperson are public arbitrators and one member of the panel is appointed with an industry background. In employment cases, all three members are selected from the securities industry.
The average time from the filing of the Statement of Claim through a final hearing is approximately twelve months. For customers over the age of 65, FINRA has expressed an intention to have arbitrators handled these cases on an expedited basis, thus claims may move the process in less than twelve months. Claims with unique features may take longer.
The average hearing time is four to five days.