How to File a Securities Arbitration Claim

By Kristof, Kathy | THE JOURNAL RECORD, May 19, 1994 | Go to article overview
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How to File a Securities Arbitration Claim


If you have a sticky dispute with a broker that can't be settled amicably, there is a viable and fairly low-cost way to settle it: binding arbitration.

Securities arbitration, which allows an impartial third party to adjudicate broker-client disputes, is the mandatory form of settlement procedure when brokers and their clients have a rift. That's because most brokerage firms require customers to sign arbitration agreements when they open accounts.

The benefits of arbitration are clear: Cases are heard fairly quickly _ usually within one year vs. up to five years in civil courts _ and the cost is reasonable.

The bad news is that there is little, if any, chance to appeal an adverse decision. Unless the arbitrator is biased or had a clear conflict of interest, the decision is legal and binding.

Arbitration filing fees range from about $30 for a small case where the amount in dispute is less than $1,000 _ to $1,800 for cases where the amount in dispute is over $5 million.

Plaintiffs can represent themselves, or be represented by anyone they choose. They do not need to hire a lawyer or an arbitration specialist. (However, most experts recommend hiring a professional when the dispute involves a lot of money. That's because the brokerage is almost always represented by an attorney; big-money disputes are usually stickier and more hotly contested. A General Accounting Office study found that customers were much more likely to win when they were professionally represented.)

If you have a fairly small claim _ anything under $10,000 _ you can take it to "simplified arbitration," which is the arbitration industry's answer to small claims court. Notably, simplified arbitration is faster, cheaper and more fruitful for investors.

Where the average securities arbitration case takes roughly 10 months to complete, simplified arbitration procedures are generally finished in five.

In-person hearings, technical motions and attorneys generally are unnecessary. So frequently the only cost to the investor is the filing fee of $30 to $225, depending on the size of the case and whether the investor requests an in-person hearing or is content to handle the matter by mail.

Investors are also more likely to win a simplified arbitration case than an ordinary securities arbitration case, says Samantha Rabin, managing editor of the Securities Arbitration Commentator, a New Jersey-based newsletter that tracks such statistics. Investors who go through simplified arbitration win about 70 percent of the time vs. about 50 percent of the time in ordinary arbitration hearings.

How do you file an arbitration claim?

The first step is to find out which regulatory organization has jurisdiction and the requisite expertise to handle your dispute.

There are several organizations that handle such hearings, including the New York, American, Pacific, Cincinnati and Philadelphia stock exchanges, not to mention the Chicago Board Options Exchange (CBOE) and the Municipal Securities Rulemaking Board (MSRB).

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