In 1987, the U.S. Supreme Court upheld the use by brokerage firms of customer arbitration agreements. Consequently, arbitration of customer complaints is essentially the law of the land as every major firm requires that clients arbitrate their claims against the firms. Additionally, there are limited rights of appeal of an arbitration award.

Arbitrations are intended to be less formal than court proceedings (although arbitrations have become increasingly more complex in recent years). Most arbitrations are heard by a three-arbitrator panel, generally composed of a lawyer (who acts as chairperson); a member of the public (oftentimes a business person or lawyer); and an "industry representative" (generally a person employed by another brokerage firm). Advocates of industry representation on securities arbitration panels contend that the industry representatives provide added knowledge on the securities process. However, most hearings require expert testimony, which supplants arguments in favor of industry participation on the panels. Obviously, special care must be taken in the selection of the arbitration panel.

Generally, arbitrations are heard within 11 months of the filing of the Claimant's Statement of Claim, the document that commences the arbitration. The filing costs of an arbitration are considerably higher than those for a court proceeding. Also, FINRA, the organization that administers the arbitration process, charges daily hearing fees. In recent years, arbitration proceedings have taken on many of the same characteristics as a civil trial, such as discovery, motions practice, and the use of expert witnesses. Consequently, many securities arbitration proceedings are becoming more complex, underscoring the need for an experienced civil litigator on your side. 

National Securities Arbitration Practice 

The Firms Securities Arbitration Case Evaluation and Process

Fees and Cost for Securities Arbitration