FINRA Arbitration
The primary dispute resolution process for investor claims against broker-dealers, conducted by the Financial Industry Regulatory Authority.
What is FINRA Arbitration?
FINRA arbitration is a formal dispute resolution process administered by the Financial Industry Regulatory Authority (FINRA) in which investors resolve claims against broker-dealers, registered representatives, or other FINRA members outside of the court system. Investors agree to FINRA arbitration through their brokerage account agreements, which typically include mandatory arbitration clauses. The process is generally faster and less expensive than litigation; disputes under $100,000 are decided by a single arbitrator, while larger claims require a three-arbitrator panel. Awards are legally binding and enforceable in court, but appeal rights are very limited.
Example
An investor who lost $150,000 following an alleged unsuitable investment recommendation from their broker files a FINRA arbitration claim. After a hearing before a three-arbitrator panel, the arbitrators award the investor $90,000 in compensatory damages. The brokerage must pay within 30 days or face license suspension—without access to the court appeals process available in ordinary litigation.