The Financial Industry Regulatory Authority (FINRA) has created a parallel universe for handling disputes outside of the regular court system. It's a bit like a sci-fi heroine finding herself in an alternate universe where up is down and the sun rises at midnight but sets at 8 a.m. In the FINRA universe, everybody has agreed to arbitrate or mediate their disputes.
Some FINRA arbitrators prefer to arbitrate cases, while others prefer mediation. As a FINRA arbitrator and mediator, I believe that there is value in choosing to do both. I find that I am a stronger, more effective mediator because of my work as an arbitrator and vice versa — my arbitration work is stronger because of my work as a mediator.
FINRA Matters
First, most FINRA arbitrators start out as arbitrators, later moving on to becoming mediators. That was the case for me back in 2007. FINRA trains its arbitrators and, of course, as cases come your way, you learn more and more about the industry.
Almost everyone is touched by FINRA in some way. If you maintain a securities account with any brokerage house, be it full service, some service, or discount, you have agreed to arbitrate your disputes through FINRA. And all employees working in the financial industry have agreed to arbitrate their disputes with their employers.
Here are six compelling reasons to consider arbitrating and mediating FINRA cases instead of limiting your FINRA practice to only one ADR method:
1. You have specialized experience.
FINRA arbitrators see cases involving customers dissatisfied with their returns; customers unhappy with the selections made by their broker, claiming "unsuitability;" and employees who are moving to a new employer and unhappy with non-compete clauses.
This specialized knowledge, so different from the typical car accident or "slip-and-fall" cases typically seen in mediation give a FINRA arbitrator an invaluable "leg up" when mediating cases.
2. An experienced FINRA mediator who arbitrates can look the attorneys and parties "in the eye" and candidly tell them what the FINRA arbitrator will find important in their case.
He or she can be brutally honest about the strengths and weaknesses and be that "agent of reality" that perhaps the attorney and client need to encounter.
3. You understand the costs involved in each ADR method.
A FINRA arbitrator sees the costs expended by the parties in arbitration. Many times, affidavits for attorney's fees are included in arbitrations and, as a mediator, I can appreciate the costs that parties in a dispute will expend to get through the arbitration and use that knowledge to give the parties accurate information as a mediator.
I want the parties to make the best decisions they can make with the most accurate information.
Arbitrations tend to go long—almost every arbitration in which I have participated has gone long. One reason? Arbitrators do not have the same control over the hearing that a judge has in terms of barring testimony and excluding evidence.
Longer arbitrations mean higher attorney's fees and higher forum fees, and understanding the cost structure makes a FINRA mediator more effective. The reverse is true as well; as an arbitrator I can appreciate what the parties are sacrificing in order to move forward with their case. It gives me greater empathy toward everyone.
4. You are familiar with the speed of FINRA arbitrations.
