What is the disadvantage of FINRA arbitration?

Shareholder Sean Sweeney discusses the disadvantage of FINRA arbitration.

By contract, you’ve given up your constitutional right to have your dispute resolved by a jury of your peers, and by a judge.
Rather than the jury of your peers, you have a panel of arbitrators.
These arbitrators are pre-selected as eligible to be arbitrators by FINRA.
There is also no meaningful right of appeal.
If you go to court with a judge, and the judge is just wrong and makes an incorrect decision, you can appeal it.
The only thing you can appeal with FINRA Arbitration, if that the decision was either beyond the authority of the arbitrator.

“The disadvantage of FINRA arbitration is that by contract, you’ve given up your constitutional right to have your dispute resolved by a jury of your peers, and by a judge that you paid, with your tax dollars, to manage your case. Instead, you’d have to pay a filing fee that’s significantly more than it would be in court, and you have your case decided by a panel of arbitrators. What that means, is that rather than the jury of your peers, you have a panel of arbitrators who have been pre-selected as eligible to be arbitrators by FINRA. This requires that they meet certain education and experience requirements, which maybe could be a good thing, but also could be a disadvantage. And you have your dispute decided by those panel of three arbitrators. The other big disadvantage is if there’s no meaningful right of appeal. So, if you go to court and the judge is just wrong, just gets the law wrong, makes an incorrect decision, you can appeal it. You can go to the Court of Appeals, and you can say, “hey that judge was incorrect on this point of law.” And the Court of Appeals can say, “yeah, you’re right he was.” And send it back to the Circuit Court to get that resolved. Arbitration has a very, very limited scope of appeal. Basically, the only thing that you can appeal, is that the decision was either beyond the authority of the arbitrator, they decided something that wasn’t before them, or that they somehow were engaged in some kind of fraudulent conduct in their decision and that justifies being able to set aside or vacate the award, other than that, there’s no real appeal rights for an arbitration. So, there are some advantages to arbitration, they’re typically faster, often cheaper, has much more limited discovery, which obviously doesn’t help the claimant sometimes, but can help with the costs of the process and allow it to be more accessible to more people. So, if there are some disadvantages of FINRA arbitration and there are some advantages. It doesn’t really matter because if you have a dispute with a broker-dealer, you agreed to do it, whether you realize it or not. So that’s where the dispute will be resolved. And that’s where we help investors recover their money.”

The Securities Lawyers practice group at Halling & Cayo, S.C. can help. We take cases all over the country, and we only get paid if we win. Contact us to set up a meeting to review your case.