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The FINRA & NFA Dispute Resolution Process


An Overview of Arbitration & Mediation

Arbitration and mediation are two distinct methods of resolving securities, commodities and futures disputes between two or more parties. Disputes, claims or controversies arising out of business dealings with any Financial Industry Regulatory Authority (FINRA) or National Futures Association (NFA) member firm can be resolved in arbitration or mediation.

Arbitration is a formal dispute resolution process in which the parties—customers, brokers, employees or brokerage firms making or responding to a claim—select an arbitrator, listen to the arguments set forth by parties, study the testimonial and/or documentary evidence, and render a decision on the matter. By arbitrating your claim, the parties forego the opportunity to have the same matter decided by a court of law because an arbitration award is final and binding.

Mediation is an informal, voluntary and non-binding process. A mediator facilitates negotiations between disputing parties. The mediator's role is to help the parties find a mutually acceptable solution to the dispute.

FINRA Arbitration

Rather than having their disputes decided by a judge and jury, participants to arbitration proceedings have their dispute resolved by a panel made up of typically three arbitrators who are knowledgeable in the area of securities laws and regulation. The U.S. Supreme Court decision, Shearson v. MacMahon, 482 U.S. 220 (1987) enforced mandatory binding arbitration clauses in the securities industry. One of the most important legal aspects of arbitration is that arbitration awards are final and binding, subject to review by a court only on a very limited basis.

Duty to Arbitrate

Investors are bound to FINRA arbitration by contract and registered representatives and their firms are contractually bound to arbitrate their disputes by their membership in the Financial Industry Regulatory Auth