Registered Investment Advisor (RIA) firms play a vital role in guiding investors towards their financial goals. But, like any industry, disputes and conflicts can arise between RIAs and their clients, necessitating a mechanism for resolving these issues.
For cases falling within the purview of the Financial Industry Regulatory Authority (FINRA), arbitration serves as the designated forum for dispute resolution. However, navigating the FINRA arbitration process can be intricate and certain compliance issues tend to surface frequently.
This article will enlighten you about the common compliance issues with FINRA arbitration and how a My RIA lawyer in Atlanta can help resolve them.
What does FINRA arbitration means?
FINRA arbitration refers to the dispute resolution process provided by the Financial Industry Regulatory Authority (FINRA). It resolves conflicts between investors and brokerage (RIA) firms, as well as other financial industry participants.
The good thing about FINRA arbitration is that you don’t have to go through traditional litigation in court. Parties involved in a dispute can opt to resolve their disagreements through arbitration, which is a more streamlined and cost-effective method.
A panel of arbitrators, usually consisting of industry professionals and public members, is selected to hear the case and make a binding decision.
6 common compliance issues with finra arbitration
Some of the common compliance issues with FINRA arbitration are:
Inadequate documentation of agreements
When parties involved in FINRA arbitration fail to properly document their agreements, it can lead to confusion and disputes. That’s because verbal agreements, without clearly written records, can result in differing interpretations and memory lapses over time. This leads to challenges in proving the intended understanding between parties.
Improper conduct
During a FINRA arbitration, it’s crucial for you and other parties to act fairly and transparently. Improper conduct refers to behaviors that go against the rules and fairness of the arbitration process.
This can include things like trying to trick the arbitration panel, hiding evidence, or giving false information. Such conduct not only damages the reputation of the party doing it, but it also hurts the overall process.
Violation of arbitration agreements
In the world of FINRA arbitration, you agree to certain rules and guidelines and it’s crucial to stick to your word. Violating these agreements can create chaos in the process.
For example, imagine not following the timeline you agreed upon, not respecting the arbitrator or RIA lawyer you chose, or trying to switch to a court case after committing to arbitration.
These violations mess up the fairness and smoothness of the arbitration process, making it much harder to find a resolution.
Failure to disclose material information
Honesty is your best policy during a FINRA arbitration. Failing to disclose important information is like hiding cards in a game. It means you’re not sharing essential facts that could actually change how things play out.
These may be details that alter how the arbitrators understand the situation or even impact the final decision. It can include your financial interests, investments, or other money-related matters that could influence the case.
Non-compliance with awards
When a FINRA arbitration panel issues an award, it’s a binding decision that all parties should respect. Non-compliance with awards undermines the credibility of the arbitration process. It’s like a sports game where one team refuses to accept the final score.
Similarly, not complying with a FINRA arbitration award disrupts the fairness of the process and makes reaching a resolution more difficult.
Note that the Code of Arbitration Procedure Rule 12904 for Customer Disputes and Rule 13904 for Industry Disputes outlines the requirement for parties to comply with arbitration awards within 30 days.
Breach of confidentiality
Maintaining confidentiality is paramount to the integrity of the FINRA arbitration process. Parties involved in arbitration often share sensitive information during the proceedings, believing that it will remain confidential. Breaching this trust by disclosing confidential information to unauthorized parties can harm the fairness and effectiveness of the process.
Now you understand the common compliance issues with FINRA arbitration
When it comes to FINRA arbitration, there are a few important things to remember. First, sticking to your agreements and respecting the rules is like the foundation of a fair game. Violating these agreements can make things messy and disrupt the process.
And second, being open and honest, especially about the financial aspects of the case, is like playing with all your cards on the table. Keeping things secret or not sharing important info messes up the fairness of the process.
If you need guidance on navigating the world of FINRA arbitration, Reach out to a firm like My RIA Lawyer for assistance. They can be your trusted allies in understanding the rules, protecting your interests, and ensuring a fair resolution.
