Q. What is a predispute arbitration clause?
A. Almost every securities brokerage firm will provide you with a standard new account form with a clause that requires you to pursue any grievance through arbitration proceedings instead of the court system.
Q. How does arbitration work?
A. Arbitration is similar to a trial, except instead of a judge and jury you get a panel of one to three arbitrators which acts as both judge and jury. They hear and weigh the arguments and evidence of both sides of a case, then render a binding decision. The arbitrators generally include at least one "industry" insider and two people from outside the industry. The panel may include accountants, attorneys, sales representatives, bankers, educators, retired judges and other professionals. Unlike court proceedings, arbitration usually doesn't involve depositions, motions, or appeals. It's usually much faster and cheaper than civil court. The average length of time is 12 months from filing to first hearing, versus more than two years in state or federal court. The arbitration process is explained in detail at the Securities Law website.
Q. Who conducts the arbitration proceedings?
A. The three main forums for resolving securities arbitration disputes are:
- The American Arbitration Association
- The New York Stock Exchange
- The National Association of Securities Dealers, Inc.
- The Financial Industry Regulatory Authority
Q. Where is the arbitration proceeding held?
A. At different places around the country. Look at our page on stock fraud arbitration by state to locate the city where your arbitration may take place.
Q. How much will it cost to file a Statement of Claim in an arbitration proceeding?
A. Every forum charges its own filing, administrative and hearing fees. The average filing fee with the NASD is approximately $1200. The greater the amount of your claim, the greater your filing and administrative fees will be. If the case settles, a portion of this fee may be returned.
Q. What other costs are involved?
A. Although our initial consultation is free, you can expect to incur expenses related to preparing a damages exhibit for purposes of mediation and/or arbitration. If the case does not settle (the majority do), then an expert witnesses may have to be retained to testify on your behalf. Though we are essentially experts ourselves, we—as your attorneys—cannot testify. We have retained the services of numerous nationally recognized experts in the securities industry. We also charge a one time "sundry costs" fee for courier and mailing costs, photocopying costs and any other incidental expenses incurred by Shepherd, Smith, Edwards & Kantas in pursuit of a your claim. Other legal fees will be discussed in advance.
Q. How does Shepherd, Smith, Edwards & Kantas set its fee?
A. We work on a contingency fee; if you recover nothing, you pay no legal fees. If you do recover your claim or any portion of your claim, you are responsible for paying Shepherd, Smith, Edwards & Kantas a percentage of the amount recovered.
Q. Can I work it out with the brokerage firm without involving attorneys?
A. You can try, but investors who have qualified legal representation consistently do better in arbitration proceedings. If you are going to hire an attorney, do so as soon as possible. DO NOT talk to the brokerage firm except through an attorney. This includes e-mails. Talking to the brokerage firm is one of the biggest mistakes investors make. Learn more about how securities attorneys help investors recover investment losses here.
Q. I live outside the United States. Do I file in my country or where the brokerage firm is located?
A. Because of FINRA/NASD rules governing the jurisdiction of brokerage firms, international clients with brokerage accounts with a NASD-registered firm must file arbitration cases in the United States. Shepherd, Smith, and Edwards has a lot of experience with international clients, particularly from Latin America.
Q. What are my odds of "winning" a case?
A. According to the Securities Arbitration Commentator, a periodical publication which has studied the statistics of securities arbitration cases, 80% of all customer cases settle in favor of the investor prior to the rendering of an arbitration award. Over half of the remaining 20% that do not settle prior to arbitration result in an award to the customer. Every case is different; Shepherd, Smith, Edwards & Kantas cannot provide any guarantees that any particular arbitration or lawsuit will result in a recovery. However, our decision to accept a case is a statement of our belief that the case has merit and that some recovery of money is warranted.
Q. Is it worth all the time and trouble?
A. That is a decision only you can make. Consider that you'll be asked to come up with copies of your financial records and tax returns. There are also other questions about your background and experience that must be answered. You must decide if you want the broker to get away with what he or she did..