The Investor Arbitration Process

Most investor arbitrations take place under the rules of the National Association of Securities Dealers (NASD).  The New York Stock Exchange, the American Arbitration Association, and other organizations also sponsor arbitrations.  The NASD Dispute Resolution website has publications that describe the arbitration process.

Under NASD rules, you or your representative first files a statement of claim which describes your specific claims and the supporting facts, together with a document submitting your claims to arbitration, filing fees, and a hearing deposit.  Depending on the size of the claim, and the preference of the investor, the claim could be decided on the papers, by one arbitrator, or by a panel of three arbitrators, one of whom is always a stockbroker or other member of the securities industry.  Most arbitrations are conducted by a panel of three arbitrators.

When you file a claim, the NASD will serve it on the defendants, who have 45 days to file their responses.  Next, the parties usually send each other requests for all relevant information and documents.

Finally, one or more hearing dates are scheduled, approximately one year after the claim is filed.  The hearing usually takes place at the NASD hearing location closest to the residence of the investor. 

Before the hearing, the parties or their lawyers submit briefs summarizing their factual and legal arguments.  Then the arbitrators, the parties, their lawyers or other representatives, and sometimes a member of the NASD staff, meet around a table.  Usually, the hearing is audio taped. 

After the arbitrators decide any pre-hearing motions, the parties or their representatives make opening statements.  The claimant (individual investor) presents his or her case, by calling witnesses, personally testifying, and offering exhibits.  Next, the respondents (investment broker and/or securities firm) present their position.  All parties have a chance to make closing arguments.

During the hearing, each party has the right to cross-examine the other's witnesses.  In addition, arbitrators may ask their own questions.  An arbitration hearing does not have to follow the Rules of Evidence, which govern the information that parties may offer as proof in a civil trial. 

A hearing on a particular claim may be as short as one day or as long as several months.  At the conclusion, the NASD sends out the arbitrators’ written decision on each claim presented at the hearing.

If the investor wins an award of compensation, the brokerage firm must pay it promptly or face NASD disciplinary action.  If another organization sponsored the arbitration, and the losing party does not make timely payment, the winning party may ask a court to convert the award into a legally enforceable judgment. 
If you believe that you have been the victim of investment fraud or broker misconduct, it is important to talk with a Michigan investment fraud lawyer today.  Please submit a simple, free and confidential legal consultation form now.  

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