Rules Frequently Asked Questions (FAQ)


1. Are individuals permitted to hire a professional who is not a licensed attorney to represent them in an arbitration?
Pursuant to Code of Arbitration Procedure Rule 12208 for Customer Disputes and Rule 13208 for Industry Disputes, all parties have the right to be represented by counsel during any stage of an arbitration. Parties to an arbitration or mediation may represent themselves or be represented by an attorney admitted to practice and in good standing in any jurisdiction. A party may be represented by a non-attorney, unless state law prohibits such representation, the person is currently suspended or barred from the securities industry in any capacity, or the person is currently suspended from the practice of law or disbarred. In addition, please review the information related to California, Florida and New Jersey on the FINRA website for specific rules regarding representation in those states.
2. What will happen if a party to an arbitration fails to file an answer or reply?
Pursuant to Code of Arbitration Procedure Rule 12308 for Customer Disputes and Rule 13308 for Industry Disputes, if a party fails to answer, answers a claim with a general denial, or fails to include defenses or relevant facts in its answer that were known to it at the time the answer was filed, the panel may bar that party from presenting the omitted defenses or facts at the hearing. In addition, the party may be subject to default proceedings under Rule 12801 for Customer Disputes and Rule 13801 for Industry Disputes.
3. Are members and associated persons required to respond to the Statement of Claim and submit a signed Submission Agreement?
Yes. Code of Arbitration Procedure Rule 12303 for Customer Disputes and Rule 13303 for Industry Disputes state, in part, that within 45 calendar days from receipt of the Statement of Claim, respondent(s) shall serve each party with an executed Submission Agreement and a copy of the respondent's Statement of Answer. If a respondent does not timely submit a Statement of Answer, the respondent may be subject to default proceedings under Code of Arbitration Procedure Rule 12801 for Customer Disputes and Rule 13801 for Industry Disputes or be barred from presenting any defenses or facts at the hearing, pursuant to Code Rule 12308 for Customer Disputes and Rule 13308 for Industry Disputes. As stated in Notice to Members 04-11, a party's failure to sign and submit the Submission Agreement may cause confusion, lead to ancillary litigation, and undermine the enforceability of arbitration awards. Arbitrators have wide discretion in addressing a respondent's failure to submit a signed Submission Agreement. Possible sanctions include assessing monetary penalties payable to one or more parties, precluding a party from presenting evidence, making an adverse inference against a party, assessing postponement and/or forum fees, and assessing attorneys' fees, costs and expenses. In addition, members and associated persons who fail to comply with an order of the panel may be referred to FINRA Enforcement for possible disciplinary action, which can include suspension or termination of FINRA membership or registration.
4. May the parties exchange interrogatories or conduct depositions in a FINRA arbitration proceeding?
Depositions and interrogatories are generally not permitted (absent agreement of the parties) in FINRA arbitration disputes. Pursuant to Code of Arbitration Procedure Rule 12510 for Customer Disputes and Rule 13510 for Industry Disputes, the panel may permit depositions under very limited circumstances, including:

 

  • To preserve the testimony of ill or dying witnesses;
  • To accommodate essential witnesses who are unable or unwilling to travel long distances for a hearing and may not otherwise be required to participate in the hearing;
  • To expedite large or complex cases;
  • In cases involving claims of statutory employment discrimination, if necessary and consistent with the expedited nature of arbitration (for industry disputes only); and
  • If the panel determines that extraordinary circumstances exist.
5. May I determine the number of arbitrators who will hear my claim?
Rule 12401 of the Customer Code and Rule 13401 of the Industry Code provide that one arbitrator will decide a case if the amount of the claim is $100,000 or less, exclusive of interest and expenses, unless all parties agree in writing to three arbitrators.  If a claim is more than $100,000 or for an unspecified or non-monetary amount, a panel of three arbitrators will be selected to decide the case, unless all parties agree in writing to the appointment of a single arbitrator to decide the case.
  • There are several benefits to the appointment of a single arbitrator, including: 1) reduced hearing session fees because hearings sessions with one arbitrator cost substantially less than hearing sessions with three arbitrators ($450 per hearing session versus $1,200 per hearing session in cases with over $500,000 in damages),  2) reduced fees for other events such as initial pre-hearing conferences, other pre-hearings, and  postponements, 3) reduced case processing times because single arbitrators do not need to coordinate their calendars with co-panelists to schedule a hearing, 4) reduced party effort in the arbitrator selection process because parties will receive one list of 10 names from which to choose their arbitrator, rather than three lists of 10 names each (i.e., parties will only need to research the disclosures and histories of 10 proposed arbitrators instead of 30),  5) reduced costs for photocopying pleadings and exhibits (by two-thirds), and 6) less likelihood of last minute changes in hearing dates because of arbitrator scheduling issues.