Taking a brokerage firm to arbitration is a gut-wrenching and often necessary process. But if a broker or brokerage firm has defrauded you or misrepresented your best interests, what are your options?
Most brokerage firms make you sign an arbitration clause, which forfeits your right to sue them. In addition, many states have laws that favor firms over investors. If you’ve suffered investment losses due to the negligence of your broker, then arbitration may be your only option. Continue reading to see if you need to hire an attorney for your upcoming arbitration.
Mediation Before Arbitration
Sometimes, the best case is the one that’s never heard by a judge or arbitrator. Once you submit your case to a formal setting like an arbitration hearing, you surrender a little power. Before you take a case to that far, it’s worth it to see if you can reach a settlement on your own through mediation.
Mediation is a less formal process that involves you and your broker working out a resolution. If you’re able to find terms that both sides agree to, then you’ll avoid the hassle of arbitration.
The process works by finding a mediator to handle communication between you and the stockbroker. The mediator will be someone who understands the stock market and securities law.
Both sides let the mediator know what they’re looking for in the deal. From there, the mediator works with them to put together a deal that benefits all parties.
Mediation gives you the opportunity to have a say in the final outcome of your dispute with your broker. Once you turn your case over to an arbitration panel, they’ll decide the outcome based on the facts. You won’t have any hand in the decision, and the arbitration panel’s ruling is binding.
If the panel decides in favor of the stockbroker, then you could end up getting no compensation. The aim of mediation is to find a result that both sides can be happy with. If you’re unable to find a resolution, then it’s time to consider arbitration.
The Arbitration Process
If you’ve never been through arbitration before, then you may be a little curious about how the process works. Arbitration is not a court trial, and arbitrators are not judges. It’s a closed-door meeting between two disputing parties and an impartial third party. The arbitrator looks at the evidence, hears the dispute, and make a decision.
Arbitration panels have more latitude in assigning rulings than judges, and they’re rulings aren’t always black and white. For example, an arbitrator may decide that both you and the brokerage firm have valid arguments and rule in favor of you both. They may decide that the broker is only at fault to a degree and decide to reward you to the degree of fault on the broker’s behalf.
The most important thing to know about arbitration is that the ruling that comes out of it is binding and final. You won’t get to contest the decision or appeal to a higher court. That means you need to get it completely right when taking a case before an arbitrator.
Do You Need A Lawyer For Arbitration?
Being that arbitration isn’t a legal matter—at least not in the strictest sense—you don’t have to have legal representation. Nor do you have to demonstrate your competency to represent yourself. Taking those facts into consideration, it doesn’t mean that you don’t need a lawyer.
A securities arbitration attorney is a great ally to have in an arbitration. They greatly increase your chances of winning your case. You can bet that the brokerage firm will be coming to the meeting with their lawyers ready to read you the riot act. If you go in there unprepared, they’ll railroad you.
In truth, you need a lawyer before you even make a decision about arbitration. People lose big money on stocks all the time. Taking a huge loss doesn’t mean that someone is financially liable for it.
Discussing the facts of your dispute with a lawyer can keep you from the embarrassment of taking a non-issue before arbitrators. If you do have a case, then your lawyer will know what kind of proof to look for and how to get it.
Arbitration isn’t a court trial, but if you don’t know securities law, then you shouldn’t go it alone. Get a lawyer on your side who knows the game and how to navigate its murky waters.