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Investor Arbitration at FINRA & AAA - Transcript

It’s interesting to understand who is subject to FINRA or AAA arbitration and people get to those forums in different ways. Arbitration is a creature of contract so it’s not like a court where it’s open to everyone.

You have to have some sort of an agreement in order to get into arbitration. That agreement can come before the dispute when you contract with someone or after the dispute if both parties agree that they would rather do it in an arbitration forum.

For public investors, when they sign a new brokerage contract they generally sign something saying that they are willing to go to arbitration for any dispute between the brokerage firm and the public investor.

Uniquely at FINRA public investors even if they haven’t signed an agreement like that are able to request arbitration and the brokerage firm has to arbitrate with them.

That’s one of the benefits of the FINRA rules for arbitration, because arbitration is much less expensive and much quicker than going to court.

For an industry professional at the time that they signed their unifor uniform employment application known as the form u4. They agree that any disputes they have with their their customers or with the broker dealer will be resolved in arbitration and that also includes disputes relating to their licenses such as expungement. If there’s a poor termination reason or a customer complaint on there they can seek expungement through the FINRA arbitration process.

If you’re dealing with a registered investment advisor most of those firms have arbitration agreements but not with FINRA, typically they do it with the triple A, what is as we call it the American Arbitration Association, and that is something that is a creature of contract as I said earlier it’s expensive.

The triple-A is much more expensive than FINRA and FINRA has agreed if post-dispute the parties agree to use FINRA as a forum for the public investors they lend their forum to registered investment advisors so that’s generally how people get into arbitration.

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