What if I Don't Get Paid?

Brokers must pay arbitration awards within 30 days of receipt, unless they file in court a motion to vacate. Interest is due from the date of the award, if:

• the broker does not pay the award within the 30 day period; or
• the broker files a motion to vacate the award and the motion is denied;

The arbitrators can decide on another interest arrangement. For example, the arbitrators can decide that interest is due from an earlier or later date. The interest rate is the legal rate in the state where the award was made (usually where the arbitration was held), unless the arbitrators set a different rate.

 

Investors who haven't been paid within 30 days of receipt of the award should notify the SRO that issued the award. Under the Constitution, Rules, and Bylaws of the SROs, the membership or registration of a member can be suspended or canceled if the member does not comply with an arbitration award, unless the member has made a timely motion to vacate or modify the award (see below). Check with your SRO for its specific practices and standards in this regard.

 

Arbitration awards are also enforceable under federal and state laws. For example, under the Federal Arbitration Act, (9 U.S.C. sec. 1 et seq.) and every state arbitration law, a party has one year from when the award was issued to move to confirm the arbitration award. By this summary process, an arbitration award is turned into a court judgment that can be enforced like any other judgment. The arbitration statutes provide very limited grounds for attacking arbitration awards, such as fraud, arbitrator misconduct, arbitrators exceeding their authority, or arbitrator bias. It is usually difficult to overturn an arbitration award. The typical time frame for mounting a challenge to an award is three months from when the award was issued.

 

For a short period of time after an award is issued, an arbitrator may be asked to "modify" or correct technical or calculation errors in their award that don't affect the merits of the award. This authority is derived from the arbitration laws in some (but not all) states, that allow a party to request a modification of award, typically within 20 days after the award was issued.

 

New York's arbitration law is a good illustration of the award modification process. Under Section 7509 of the New York Civil Practice Law and Rules, a party must request modification of an award in writing, within 20 days after delivery of the award. This request is sent to the SRO administrator, and to the other parties, who have 10 days to reply. After the other parties reply (or the 10-day period expires), the arbitrators have 30 days to act on the modification request. The arbitrators will either deny the request to modify their award, or issue a written modification of their award.

 

Not every state arbitration law authorizes arbitrators to modify their award, but every state arbitration law allows courts to correct such technical mistakes in awards.

 

The awards will be made publicly available. Arbitrators are not required to write opinions or provide reasons for the award. A party, however, may request an opinion. This request should be made no later than the hearing date. Some sponsoring organizations delete from the public version of awards information that identifies either the arbitrators or the parties. The decision of the arbitrators is final; that is, the decision is subject to review by a court only on a very limited basis.

 

Important: It should be kept in mind that the arbitrators' decision will be based solely and exclusively on the documents and related material provided by the parties to a dispute. In the case of a hearing, the decision will be based on both the documents and testimony presented at the hearing. It is therefore important that a party's case be carefully and thoroughly prepared. As noted, this may be done either with or without the assistance of counsel. Such preparation will ensure that all relevant facts and evidence will be presented by the parties and, thus, considered by the arbitrators. Arbitrators are not allowed to reconsider a decision because new evidence has been found after the award was rendered.

 

In addition, it is the responsibility of the parties to submit briefs for any novel theories of recovery and/or requests for special damages. In some cases, arbitrators may require even parties without lawyers to support their claims by reference to the relevant law.

 

Arbitrators should not make independent factual investigations. The arbitration case belongs to the parties, and the parties should present the facts as they wish. Nothing, however, prohibits an arbitrator from reading the text of a rule, statute, or legal citation referred to in a party’s pleading (e.g., if the complaint charges a violation of a suitability rule, the arbitrator may read the rule).

When in doubt about an issue, legal or otherwise, arbitrators should request briefs from the parties. If cases are cited in a party's motion or brief, and the arbitrators wish to read the full court opinions, the arbitrators should ask the parties to supply copies, and if necessary, the arbitrators may look up the cited authorities themselves. Arbitrators generally should review only those materials presented by the parties to the arbitrator.

In those limited instances where an arbitrator believes that independent research is appropriate, as described above, the arbitrator should disclose the nature of that research to the parties. By doing so, the arbitrator makes the parties aware of the matters being considered by the arbitrator and the parties may respond accordingly.

The Code of Ethics requires that arbitrators keep confidential all matters relating to the arbitration proceedings and decision. However, the Code of Ethics also states that "an arbitrator may obtain help from an associate, a research assistant or other persons in connection with reaching his or her decision if the arbitrator informs the parties of the use of such assistance and such persons agree to be bound by the provisions of this Canon."