How are the Hearings Conducted?
The parties determine the arbitration dates in the prehearing conference that takes place relatively early in the case. The arbitration hearing is in the city of the Claimant’s residence, even if the stockbroker worked in another city and state.
The arbitration is conducted either in a hotel conference room or a FINRA office conference room. The room should be big enough to accommodate the number of witnesses who will be there. Securities arbitrations are private, so no interested third party or member of the press can stand at the back of the room and watch. The only people permitted in the arbitration are the arbitrators, the lawyers for the parties, the Claimant(s), a representative for the Respondent, and each side’s expert witness. Unlike court cases where all witnesses, including experts, are sequestered until they testify and then after they testify, they depart, in securities arbitrations, experts for both sides can sit in on the entire arbitration.
The arbitration is recorded using old-fashioned cassettes and a tape recorder. This is a horrible way to keep a record of the case, but it’s the way FINRA/the NASD has done it for years. I will often hire a court reporter to attend the arbitration for the first day or so during my cross-examination of the stockbroker and supervisory personnel at the firm. Those are typically my first two witnesses that I call in our case.
As I often explain to my clients, what happens in a securities arbitration is very similar to what happens in a court case: I give an opening statement at the outset. I usually do this using a PowerPoint presentation. The Respondent’s lawyer then gives his opening statement and the panel then says, “Ms. Stoneman, call your first witness.” Witnesses and parties who testify will be sworn and are subject to cross examination by the opposing side and questioning by the arbitrators.
Since most securities arbitrations are extremely document intensive, each side usually brings to the arbitration binders of documents. I have been in arbitrations in the past where the Respondents had so many binders of documents that they had to wheel them into the room on a big cart, and the binders were at least eight inches wide. Just picking up one binder risked a back dislocation. I am much more inclined to show the arbitrators documents electronically on a big screen, however, I nonetheless provide a printed copy of the documents so that the arbitrators can look at them during deliberations.
Occasionally witnesses may be allowed to testify by telephone Parties may also present rebuttal evidence if appropriate.
After all witnesses have testified and all exhibits are into evidence, the evidentiary part of the case is over. Each lawyer then can give a closing statement which should consist of brief summations of the testimony and other evidence introduced at the hearing. As the Claimant’s, this is where I spend a fair amount of time explaining to the arbitrators how we have proven our case and the damages that they should award.
After closing statements, the parties are to leave together. The arbitrators may stay to discuss the case, however any decision they make will be submitted to FINRA in writing. FINRA will then provide the Award to the parties.
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