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FINRA Arbitration Law Firm

Securities Lawyer Jonathan Kurta
By: Jonathan Kurta Author

FINRA arbitration law firms represent investors who have suffered losses resulting from broker misconduct or outright fraud. FINRA attorneys do not prosecute criminal cases; rather, they handle cases where investors have no choice but to pursue arbitration. Investment contracts typically feature pre-dispute arbitration clauses that require investors to recover their losses through FINRA arbitration.

Unscrupulous brokerage firms rely on the fact that many investors will not pursue arbitration simply because it is an unfamiliar process. Too often a firm will simply deny a legitimate investor complaint, only to have the dispute die on the vine because the investor is not sure what steps to take next.

For investors who do decide to pursue arbitration, it is essential to get it right the first time. FINRA arbitration decisions are final and binding. It is rare for a court to overturn an arbitration panel’s decision, so investors who pursue arbitration should do everything in their power to ensure that they achieve a fair settlement – like choosing attorneys familiar with the FINRA arbitration process.

Securities attorneys are especially effective at persuading arbitration panels to enforce existing securities rules. Unfortunately, investors cannot rely purely on FINRA to prevent securities fraud. With the help of a FINRA arbitration law firm, you will have expert guidance through each phase of investment recovery, from filing a statement of claim to reaching a settlement or receiving an award.

Deciding Between Mediation and Arbitration

Securities attorneys can help you determine if your case could (and should) be settled through mediation. Mediation can allow an investor to settle with a brokerage firm without ever going through the process of FINRA arbitration. In mediation, both parties must agree to a settlement amount. If the parties cannot settle through mediation, the case will enter arbitration.

Selecting FINRA Arbitrators with a FINRA Enforcement Attorney

FINRA arbitration disputes are decided by neutral arbitrators. It can be a single arbitrator or a panel of arbitrators, depending on the amount at issue. Disputes that involve less than $100,000 are typically decided by one arbitrator, while cases of $100,000 or more have three arbitrators.

FINRA provides the platform for dispute resolution and a pool of arbitrators to choose from but does not directly decide cases. FINRA also does not provide investors with any legal advice.

To begin the arbitrator selection process, FINRA provides a randomly generated list of potential arbitrators. Investor attorneys can then rank the arbitrators according to their preference and strike certain arbitrators from the list altogether. The brokerage firm does the same, and the arbitration panel that gets assigned is a compromise between the two parties’ selections.

Arbitrators fall into two categories: Public and non-public. Public arbitrators do not have any specialized knowledge of the securities industry. An example of a non-public arbitrator would be an arbitrator who works in the financial industry or an expert witness in arbitration cases. Naturally, arbitrators who have worked in the securities industry may have some bias in favor of securities firms.

It takes research and experience to know which arbitrators are the most likely to make a decision favorable to investors. Securities attorneys use this insight to select an optimal arbitration panel.

Navigating the Cost of Security Arbitration and FINRA Attorneys

Though the process of FINRA arbitration is designed to be cheaper than an ordinary civil trial, it still has associated costs.

Hearing Costs

FINRA Hearing sessions cost money depending on the amount of money at issue and the number of arbitrators involved. You can see the official hearing session fees here.

Expert Witnesses

Securities arbitration lawyers may also summon expert witnesses. For example, a FINRA arbitration law firm may hire a handwriting expert to testify during a hearing regarding the alleged forgery of a customer’s signature used to authorize a risky securities trade. These expert witnesses come at a cost, and your attorney will be able to determine whether they add value to the case.

Lawyer Fees

Kurta Law’s investor attorneys work on contingency, meaning they only collect their fees if they recover money for their clients. As a result, our FINRA arbitration attorneys only take on cases where they feel confident they can recover money.

Help with Arbitration Costs

FINRA arbitration lawyers may argue that a brokerage firm should cover hearing costs and pay additional compensatory damages. This amount would be calculated based on a standard return that a broker could expect from the stock market during the relevant period.

Who Pays FINRA Arbitration Awards?

Brokerage firms typically pay settlements and arbitration award(s) favorable to the investor(s). Firms are more likely to have the money to pay the investor’s claim than an individual broker. In many cases, arbitration panels find that the brokerage firm was liable for approving an overly risky product and missing the red flags of an unsuitable recommendation. Furthermore, investors may struggle to get their broker to pay the settlement – a broker who does not pay their settlement may simply be barred from the industry and never face monetary consequences for their poor recommendations.

If a brokerage firm has closed or been expelled by FINRA, there may not be recourse for a defrauded investor. There is, however, Securities Investment Protection Corporation (SIPC) insurance for brokerage firms that go out of business. This insurance protects the existing brokerage account balance but cannot cover market losses. SIPC protection also does not apply to investments that are not registered with the SEC. This includes private placements, futures contracts, and hedge funds. 

Bad Investments and FINRA Defense Lawyers

Following an investor complaint, brokers often do not want to admit they recommended an overly risky investment. FINRA defense lawyers defend FINRA brokerage firm and their representatives. These types of defense lawyers may also defend clients who get into trouble with their brokerage firms over failures to disclose required information on their U5 forms, such as criminal charges. If a broker is the subject of an investigation by FINRA, they may hire a defense lawyer to avoid facing major regulatory consequences.

Risky Products

Unsuitable products are products that are too risky for an individual investor.

According to FINRA dispute resolution statistics, the following are the most common investment products at issue in FINRA arbitration disputes:

Corporate Bonds: Corporate bonds are riskier than bonds issued by the U.S. government since companies are much more likely to default.

REITs: REITs allow investors to add real estate investments to their portfolios without having to participate in the management of a property.

Options: Options trading enjoyed a recent boom in popularity. Despite the widely touted success stories, options are risky investment contracts based on guesses regarding price fluctuations. These are not for investors who cannot afford to lose their principal investment.

Private Equities: Private equities invest in struggling businesses, based on the belief that they can make it profitable with aggressive management. These are speculative, risky investments.

Exchange-Traded Funds: Exchange-traded funds may add diversification to an investor portfolio. There are riskier forms of ETFs, such as leveraged ETFs and inverse ETFs. These non-traditional ETFs can be tremendously risky and should only be purchased by investors who can handle the risk.

Variable Annuities: These insurance products can fluctuate based on the portfolio of underlying securities, making them complicated and prone to decrease in value. Furthermore, they often come with large commissions for brokers, which incentivizes brokers to recommend that investors swap one variable annuity for another, which may result in unnecessary costs for the investor.

Broker Misconduct and FINRA Arbitration

FINRA also maintains records of the most common types of alleged broker fraud:

Breach of Fiduciary Duty

Many brokers are registered investment advisers and therefore owe their brokers a fiduciary duty.


Brokers are supposed to perform their due diligence before they recommend a product. They should understand how a product works before recommending it to their customers, otherwise they may have engaged in negligence.

Failure to Supervise

Firms are required by FINRA rules to supervise their brokers to ensure compliance with securities rules and regulations.

Misrepresentation and Omission of Facts

Brokers should present an accurate picture of the investments they recommend. This means including information about potential returns, as well as realistic information regarding risk, fees, and tax implications. Misrepresentation or omission violates FINRA rules.


Even though brokers are not fiduciaries, they are still beholden to FINRA’s suitability rule and Regulation Best Interest. These rules state that the investor must recommend investments that suit their customers’ financial needs and stated goals.


Cases of outright fraud – including misappropriation of funds and Ponzi schemes – are common.

Breach of Regulation Best Interest

Regulation Best Interest states that brokers must use reasonable skill and care when recommending investments. They must also disclose any conflicts of interest they may have.

Violation of Blue Sky Laws

States have their own securities laws called Blue Sky Laws that are supposed to bolster the existing framework of federal securities laws.

Elder Abuse

Elder financial abuse is an all-too-common type of broker fraud. Investors, trustees, and beneficiaries may want to speak to a securities attorney if they were recommended risky investments or did not authorize the purchase of certain securities.

Do I Need a FINRA Arbitration Law Firm?

If you are contemplating suing a brokerage firm or a broker for investment losses, you are probably in the market for a FINRA arbitration lawyer. Our securities attorneys provide free case evaluations. Talking through your options with a lawyer is often the first step on the road to financial recovery.

Securities Lawyer Jonathan Kurta
Written by: Jonathan Kurta

Jonathan Kurta is an accomplished securities attorney and a founding partner at Kurta Law.