The Arbitration Process, Start to Finish

The Arbitration Process, Start to Finish

ArbitrationBecause nearly all brokerage customer agreements contain an arbitration clause, it is often the only option open to aggrieved investors. But what actually occurs in these proceedings is a mystery to most, since arbitration is a private forum. In other words, no one who is not directly involved can attend and arbitration awards and settlements are often sealed or otherwise kept confidential.

Here, we pull back the curtain and let you know what the process looks like from the inside.

What can Both Sides Expect?

Although it is far less formal than court, arbitration is still an adversarial proceeding where one side accuses the other of wrongdoing. But instead of being called plaintiffs and defendants, they are claimants and respondents; and the judges are called arbitrators. As with a traditional civil lawsuit, the action begins with the claimant/plaintiff. Here’s how the process typically unfolds.

Statement of Claim and Answer

To start a securities arbitration, the aptly named claimant must file a “Statement of Claim” with the Financial Industry Regulatory Authority, Inc. (FINRA), a non-governmental organization that regulates brokerage firms and exchange markets in the United States. This Statement of Claim generally blames the respondent for losses they suffered as a result of incompetence, negligence, or professional misconduct, and it articulates the damages suffered by the claimant/investor.

The respondent must then file an “Answer,” which typically repudiates the allegations that were made in the Statement of Claim. In fact, according to those in the know, respondents almost never admit even the slightest bit of culpability at the start.


Just like in a regular court cases, both the claimant and the respondent must produce documents in discovery and share them with each other and with FINRA. These documents generally include monthly statements, tax returns, correspondence, and all other information that pertains to the account in question. Unlike in a regular courtroom, however, there are no depositions during the discovery phase in arbitration, no interrogatories or requests to admit.


After the discovery phase, both sides will agree on a hearing schedule and the arbitrators will be selected by FINRA. Seated at one end of a conference table, these arbitrators preside over proceedings that are strikingly similar to a trial. Lawyers for both sides get to make oral arguments (opening and closing statements), call witness, introduce evidence, make objections, and cross-examine witnesses.

The only significant difference is that the hearing length is not open-ended and there is no judge or jury. It is important to note, however, that most arbitration hearings last just two to three days before they are settled or deliberated.


After the hearing has concluded, the arbitrators (there are generally three) deliberate and decide the case. The arbitration award is then written down, signed by the arbiters, and send to the attorneys of both parties. Although it is not set in stone, awards are generally delivered within 30 days of the final hearing.

Short and sweet, the award will reveal if the claimant won and, if so, how much. Unlike judges, arbitrators are not required to explain their decision. Even so, their decisions are final, as there is no appeals process in arbitration and very few options for undoing the award.

From first filing to the award, the entire process typically takes between twelve (12) and eighteen (18) months. For complex cases such as these, that is far faster than the average court.  To learn more about what to expect, get in touch with May Law, PC today.


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