Arbitration Forums (FINRA, AAA, or JAMS?)

Arbitration is a key mechanism for resolving disputes in the securities industry. At Malecki Law, our dedicated securities lawyers have extensive experience representing clients in various arbitration forums, including FINRA, the American Arbitration Association (AAA), and JAMS. Understanding the nuances of each forum can help you make strategic decisions that will position your claim in the most favorable light possible.

Arbitration is an alternative dispute resolution process where parties agree to resolve their issues outside of court. A neutral third-party arbitrator or a panel of arbitrators hears the case and issues a binding decision. Arbitration is typically faster and less expensive than litigation, making it an appealing option for resolving securities disputes. It is also confidential, providing privacy that traditional court proceedings lack.

FINRA, the Financial Industry Regulatory Authority, is a self-regulatory organization that oversees broker-dealers and their registered representatives. FINRA’s arbitration forum is the most commonly used forum for securities disputes involving public investors and industry professionals.

FINRA arbitration is generally cost-effective and efficient, with specific rules designed to protect public investors. For example, public investors can initiate arbitration against broker-dealers even without a pre-dispute agreement, and FINRA provides a roster of arbitrators with relevant expertise to ensure fair proceedings.

The American Arbitration Association (AAA) is a non-profit organization that offers arbitration services across various industries, including securities. Unlike FINRA, AAA does not specialize exclusively in securities disputes. Registered Investment Advisors (RIAs) frequently include AAA arbitration clauses in their client agreements.

While AAA arbitrators are often highly experienced, arbitration through AAA tends to be more expensive than FINRA arbitration. This forum may also involve slightly different procedural rules and timelines, which can influence the resolution process.

JAMS, formerly known as the Judicial Arbitration and Mediation Services, is another private organization offering arbitration and mediation services. JAMS is often chosen for high-stakes, complex securities disputes or cases requiring arbitrators with specific expertise.

JAMS arbitration is typically more flexible than FINRA or AAA, allowing parties to tailor the process to their needs. However, this flexibility and the level of arbitrator expertise come at a premium, making JAMS one of the more costly arbitration options.

The arbitration process generally follows these steps:

1. Filing a Claim: The claimant submits a statement of claim detailing the dispute and the requested relief.
2. Response: The respondent files an answer to the claim, which may include counterclaims.
3. Arbitrator Selection: Parties select one or more arbitrators from the forum’s roster.
4. Pre-Hearing Conferences: The parties and arbitrators discuss procedural matters, including scheduling and discovery.
5. Discovery: Parties exchange relevant documents and information to build their cases.
6. Hearing: Both sides present their evidence and arguments before the arbitrator(s).
7. Award: The arbitrator(s) issue a binding decision, which typically cannot be appealed with limited exceptions.

Each forum may have slight variations in these steps, so it is crucial to understand the specific rules governing your chosen arbitration forum.

The primary differences between these forums include cost, specialization, and procedural flexibility:

• FINRA: Best for public investors and industry disputes involving broker-dealers. It is cost-effective, has specialized rules for securities disputes, and provides unique protections for public investors.
• AAA: Commonly used by RIAs, AAA offers a broader range of arbitration services but is more expensive than FINRA. It may also lack some of the securities-specific protections found in FINRA arbitration.
• JAMS: Ideal for complex or high-stakes cases, JAMS provides a highly flexible and customizable process. However, it is the most costly option and is less frequently used for standard securities disputes.

Understanding the arbitration forum where your case will be heard is a critical step in any securities case. Malecki Law’s experienced attorneys can help you evaluate your options and guide you through the arbitration process to put you in a position to achieve the best possible outcome. Contact Malecki Law at (212) 943-1233 to discuss your arbitration needs and learn how we can assist you in navigating this complex process.