By Jay Salamon
FINRA is a private corporation that regulates brokerage firms and helps to oversee stock exchanges, including the New York Stock Exchange and NASDAQ. Its mandate is to protect investors from unfair and dishonest brokerage industry practices, a tough job akin to trying to dig a hole in water.
FINRA writes and enforces rules governing the activities of thousands of brokerage firms and many hundreds of thousands of individual brokers. It oversees the training and licensing of brokers; examines member firms to help ensure that they comply with industry rules; attempts to make the financial markets as transparent as possible; and engages in efforts to educate investors. FINRA also maintains a website called BrokerCheck, a free resource that lets you look up a broker’s employment history, including any customer complaints, disciplinary rulings, and terminations involving that broker.
Trial and Arbitration Rights
Finally, and of most interest to people who visit our website, FINRA operates the largest arbitration forum in the United States for the resolution of disputes between customers and brokerage firm members. Virtually all opening account agreements signed by brokerage firm customers contain arbitration agreements. These agreements result in investors waiving their right to trial in a court of law. Thus, when a dispute arises between a customer and his or her brokerage firm, that dispute is subject to mandatory arbitration under the authority and rules of FINRA Dispute Resolution.
Most arbitration matters are decided by a panel of three FINRA-trained arbitrators who hear live witness testimony and review documentary evidence submitted by the parties. FINRA arbitration generally is faster, less expensive, less formal, and more private than a lawsuit in court. But FINRA arbitration is no walk in the park.
The brokerage industry is complex; brokerage firms have endless financial resources and very sophisticated lawyers; and the rules and practices that govern FINRA arbitration are complicated and highly specialized. While an aggrieved investor need not be represented by a lawyer, it is a very bad idea to arbitrate without one. No brokerage firm would do so, and you shouldn’t either.
If you have a question about FINRA or need help in resolving a dispute with your broker, call us and ask for Hugh Berkson or Jay Salamon at (216) 696-1422 or call toll free at (886) 932-1295 for a free evaluation of your recovery options. If you prefer, email us at firstname.lastname@example.org. Or leave us your contact information and a brief comment on the form to the right and we’ll call you.