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A. Do I have to submit my claims against a broker or brokerage firm to arbitration?
Most brokerage firms these days have a mandatory arbitration provision included in their new account agreements. If you signed the new account agreement and do not have a defense to the enforceability of the agreement, you more than likely have to arbitrate any claims you may have arising out of the agreement. Should you file a claim in court anyway, the brokerage firm may request the court to send your case to arbitration.
B. What are the advantages and disadvantages to arbitration?
The amount of pre-trial discovery of information is more limited in arbitration. For example, depositions, which can be costly and time-consuming, are generally not allowed in arbitration except in certain circumstances. This can be an advantage or a disadvantage depending on whether you need additional information from the opposing side to make your case stronger. The rules of evidence in arbitrations are often more relaxed than in court. This allows parties to put in testimony and documentation that may not normally be admissible. Once again, this can be an advantage or a disadvantage. Arbitrations also offer very little rights of appeal. Once the award is made, the losing party has a very difficult burden if he/she wants to attempt to overturn that award.
C. Who makes the final decision in arbitration?
Unlike in court, arbitrations are not decided by either judges or juries. A typical arbitration panel in a securities case will be composed of an industry arbitrator and two non-industry arbitrators. The industry arbitrator will typically work for a brokerage firm that has no involvement with your case and the non-industry arbitrators will often be attorneys in private practice with specialized training and/or experience. After hearing the evidence and arguments in a case, the three arbitrators will announce their decision by filing a written award.
D. Do I need a lawyer for arbitration?
Although you are not required to be represented by a lawyer in arbitration, it is always advisable to have one. Brokerage firms will always be represented by a lawyer at the hearing and an investor representing himself/herself may not present all of the relevant evidence needed to win a case. Unlike in court, in almost all arbitration venues, your attorney does not have to be admitted to the bar of the state where the hearing takes place. Greco & Greco represents investors across the country.
The above is intended as a helpful summary for investors, but may not fully set out all relevant factors involved. This article is not intended as legal advice and does not create an attorney-client relationship. If you think that you may have a claim, you should consult with an attorney.
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