Valuable Information Everyone Should Know About FINRA Arbitrations

Investing in a company or a financial portfolio can sometimes provide fruitful returns, however, losses do regularly occur and occasionally they are a result of broker negligence or investment fraud. In such cases, a claim can be made to the Financial Industry Regulatory Authority (FINRA) and, for holder’s of a brokerage account, it is mandatory to take your claim to FINRA for arbitration. The reason behind this is that brokerage companies registered with FINRA have binding agreements with their customers which makes taking a claim to arbitration an obligation under the law.

FINRA arbitration rules aim to provide claimants and defendants with the opportunity to resolve cases out of court, this has several benefits for both parties including a faster process, lower legal fees, a choice of arbitrators and no right of appeal except in rare circumstances.

If you are considering submitting a FINRA arbitration claim or wondering what your legal standing is in the event of brokerage fraud, there are various valuable pieces of advice and need-to-know information that will increase the chances of your claim being settled in your favour, which you can read more about below.

Hire an Experienced Attorney

The first step in filing a FINRA arbitration claim is hiring the right lawyer to represent you. According to advice from the professional investment fraud lawyers at Madia Law, the attorney you choose should be aggressive, experienced and fully focused on winning your case. This is vital to your chances of success as the majority of brokerage firm’s are subject to mandatory FINRA arbitration so in many cases they will employ an equally astute securities lawyer to defend them.

What Does FINRA Do?

Formed in 2007 after receiving approval from the U.S Securities and Exchange Commission (SEC), FINRA is a non-profit organisation authorised by the government to create and enforce rules and inspect brokerage firms for compliance. The actions of FINRA can be seen in its records from 2020 as it handed out 808 disciplinary actions, collected $57 million in fines and commanded $25.2 million in compensation payments to defrauded investors. In addition, the organisation referred over 970 investment fraud and insider trading cases to the SEC.

It is Similar to a Court Hearing

The process of FINRA arbitration is often simpler and quicker than a court case, however, the legal processes and procedures do share some similarities. For instance, during the final hearing, both parties have the opportunity to present and support their legal arguments using documents and witness testimonies. Rather than a judge presiding over an arbitration case, it is the task of a single arbitrator or a panel of three to impartially examine the evidence and decide a ruling. Furthermore, FINRA arbitrators are allowed more flexibility when interpreting legal issues compared to judges.

The Process is Different for Larger Claims

The monetary size of your claim is a determining factor in the arbitration process as cases that involve larger compensation claims over $50,000 must include an in-person hearing in front of a panel of three arbitrators, one of which occupies the position of chair. On the other hand, claims considered to be small are heard by a sole arbitrator and the parties can choose to process the case in person, over the phone or by paper communication and documentation. To ensure smaller claims are heard promptly, FINRA may opt to submit a claim to go through a Simplified Arbitration Process.

Arbitration is Faster Than Court Proceedings

Arbitration cases are known to be settled quickly compared to those that go to court and are typically completed within 12-16 months. The major reason for this faster turnaround is the simplified process of discovery when both parties exchange documents and identify witnesses.

Submit Your Claim On Time

FINRA arbitrations differ from court actions as they are subject to eligibility regulations set by the FINRA forum that requires all claims to be submitted within six years of the event which caused the dispute. However, these regulations can vary state to state with some time frames for eligibility being much shorter, therefore if you are experiencing a dispute with a broker you should submit your claim sooner rather than later.

How to File a Claim

The rules governing investment fraud and broker misconduct that can be found in the FINRA Code of Arbitration state that the first step in arbitration is filing a Statement of Claim. This document will provide a detailed description of the dispute, the names of the parties involved and the amount of compensation claimed.  A strong Statement of Claim presents the facts and legal principles relating to a case.

In addition to a Statement of Claim, claimants must also complete a Submission Agreement stating that they understand and agree to adhere to FINRA’s procedures and regulations. Most importantly it also establishes an agreement between both parties that if the case ends with a hearing then the ruling by the arbitrator is final, although occasionally cases can be appealed at the SEC. Usually, these initial documents can be filed electronically on FINRA’s portal enabling them to quickly deliver the claim to the accused brokerage firm.

Your Case Will Be Assigned To A Regional Office

After FINRA has received, filed and served a Statement of Claim, they will select a regional office and arbitrator lists close to where both parties reside, who will be assigned the case. Oftentimes, the location of a hearing is the place the claimant lived when the event causing a dispute occurred, however, it can be altered in certain circumstances or if both parties are in agreement. Generally, there is a minimum of one FINRA hearing location in each state.

How Arbitrators Are Chosen

Upon receiving a Statement of Claim, a brokerage firm has 45 days to do their research on a claim, prepare any defence and serve their response. Next, FINRA will create a list of possible arbitrators for the case and send identical copies to each party, included in the document is detailed information about each arbitrator’s background such as their education, employment history, and training. Furthermore, the report lists the cases where an arbitrator issued the final ruling.

During the arbitrator selection process, either side can remove arbitrators from the shortlist and rank the remaining candidates. The list also categorises the potential arbitrators into two categories; non-public and public. Non-public arbitrators have connections with the securities sector whilst public arbitrators do not. This is important because in cases with larger claims, the plaintiff has the right to strike all non-public arbitrators.

Investing can often lead to good rewards when your money is managed carefully and professionally, however on occasion losses can be incurred due to investment, brokerage fraud or misconduct. Therefore, if you believe you are a victim of investment fraud or think you are at risk of it, then it is well worth reading advice on the legal process involved so you know what to expect.

Is Customary Arbitration the Solution to Congestion of Cases in Courts?

It is no longer news that determination of disputes especially commercial disputes before Nigerian courts is not time efficient. The courts are usually congested and cases are subjected to too many adjournments. A litigant cannot reasonably predict the term of a case in court. Presently, the courts are not sitting because judiciary workers are on strike to demand financial autonomy for the judiciary. It is clear that the delay in resolving disputes in court makes the English model court system to be ineffective in meeting the demands for justice in Nigeria in the 21st century.

Customary arbitration was used to reach peaceful resolution of disputes in pre-colonial Nigerian societies. This made it easier for business and social relationships to be maintained in that era. The reason for this is that customary arbitration encouraged amicable settlement of disputes and the need to restore cordiality amongst members of the society. The rights and liabilities of the parties were not interpreted in isolation like in the current English system of litigation. The rights and liabilities of the parties were interpreted in accordance with the general social good of the society.

Interestingly, recently in Umeadi v Chibunze (2020) 10 NWLR (Pt. 1733) 405, the Supreme Court found that where parties who believe in the efficacy of juju, resort to oath-taking to settle a dispute, they are bound by the result and so the common law principles in respect of proof of title to land no longer applies since the proof of ownership of title to land will be based on the rules set out by the traditional arbitration resulting in oath-taking. The Court further stated that where customary arbitration is pleaded and proved, it is binding on the parties and capable of constituting estoppels.

The main difference between customary and modern arbitration is that while the former cannot be enforced as a judgment of court, the later can be enforced as a judgment with leave of court. However, if a customary arbitration award is pleaded and proved before a court of law, the parties cannot resile from it as it will be binding on them and create estoppel.

Customary arbitration is indigenous to Nigerian societies and has been part of our dispute resolution mechanism since time immemorial. It is more effective than the acrimonious and technical English model of litigation. Hence, the Bill before the National Assembly to amend the Arbitration and Conciliation Act should take cognisance of the benefits of customary arbitration and make provisions for it to coexist with domestic and international commercial arbitration.

In order to ensure its efficacy, a customary arbitration award should not be subjected to the principles of English law by the court testing whether the decision of the customary tribunal meets English law standards. This is because the history and composition of the English system of adjudication is different from customary arbitration in Nigeria.

It is settled law that parties are bound by the terms of their agreement. Litigants do not need to go to conventional courts to resolve all their disputes. If parties to a dispute subject themselves to customary arbitration before a religious or traditional leader, clan or village head or other persons they trust, they should naturally be bound by the decision of the person who they choose to resolve their dispute. This will in no small way decongest the courts, promptly resolve disputes and give Nigerians a sense of fulfilment in the justice delivery system in the country.

Indeed, the Supreme Court decision in Umeadi v Chibunze (supra) is a breath of fresh air and a welcome development. It is also a clarion call for Nigeria to go back to its roots and develop its own customary arbitration and indigenous dispute resolution mechanisms, culture and principles which will better serve the demands of Nigerians for a justice system which will serve them promptly and efficiently.

Latham Secures Major Victory for Ukraine in US$6 Billion Arbitration

Latham & Watkins has secured a significant victory defending Ukraine in a landmark arbitration brought by three Cypriot companies – Littop Enterprises, Bridgemont Ventures, and Bordo Management – before the Stockholm Chamber of Commerce (SCC) in connection with the Energy Charter Treaty (ECT).

The companies are minority shareholders in Ukrnafta, Ukraine’s largest producer of oil and associated gas, alongside the main shareholder, Naftogaz, a Ukrainian State-owned company. Despite holding only a minority stake, the Cypriot companies exercised operational control over Ukrnafta until 2015, when Ukraine adopted legislation that limited the ability of minority shareholders to exercise control of companies in Ukraine.

The Cypriot companies subsequently brought an ECT claim for payment of damages in excess of US$6 billion, believed to be the largest ever treaty claim brought against Ukraine. They claimed that the changes in Ukraine’s corporate governance legislation was unlawful, and alleged that Natftogaz and Ukraine’s energy regulator sought to fix the price at which Ukrnafta sells gas to Naftogaz at a level below Ukrnafta’s cost of production and had prevented Ukrnafta from selling its natural gas on the open market.

On February 4, 2021 the SCC Tribunal unanimously dismissed the case for lack of jurisdiction and in doing so handed Ukraine the largest investment arbitration win in the country’s history.

“We are delighted to have supported Ukraine in this landmark arbitration,” said London partner Charles Claypoole. “The award sets a number of important new precedents in several controversial areas of investment arbitration.”

“This decision demonstrates the importance of protecting investment treaty arbitration from outside business influence, in particular those who have engaged in unlawful practices, in order to hamper legislative reforms.” added Hamburg partner Sebastian Seelmann-Eggebert.

The Latham & Watkins team was led by Hamburg partner Sebastian Seelmann-Eggebert and London partner Charles Claypoole, with London associates Tom Lane and Olivia Featherstone.

Does Arbitration fit Agribusiness?

The flexibility and duration of the proceedings are commonly appointed as advantages of arbitration as a dispute resolution method. However, as it is also known, not every dispute has in arbitration its best arena. That said, and noticing the little use of arbitration in conflicts related to the agribusiness, the question title of this article is posed.

It is important to stress that agribusiness involves much more than what is done on the farms. The whole chain of the agribusiness (term coined in 1957 by Goldberg and Davis) includes agrichemical, breeding, crop production, distribution, farm machinery, processing, seed supply, marketing and retail sales, not to mention the international commodities trade.

Analysing the diversity of legal and commercial relationships that can come from this complex chain, it turns clear that many of them fill the arbitrability condition. Besides this, specially nowadays, very specific knowledge is needed in order to resolve the issues arising from this field. For instance, contract farming has peculiarities that are not found in other type of contracts. It is enough to remember that UNIDROIT has already elaborated a document concerning this subject. Even diverse financial operations were created to fit this market, in which is not rare that the “currency’ is the farm production itself. All this meaning that there is a wide range of possibilities for the arbitration, and other ADRs methods, to be adopted in agribusiness, as an alternative to the State courts.

Furthermore, the agricultural production development is seasonal, what means that the duration and costs of the proceedings must be very well administrated. In conclusion, I would say that not only arbitration fits agribusiness, but also agribusiness needs arbitration, in order to reach better results in terms of dispute resolution.