What Happens After the Claim is Filed?
After the Statement of Claim is filed through the FINRA online portal, FINRA will serve the Statement of Claim upon the brokerage firm and stockbroker, if named. The brokerage firm has 60 calendar days within which to provide an Answer which will also be filed through the FINRA online portal. Brokerage firms are always asking for extensions of time within which to file their Answer. I have a protocol whereby I agree to grant the extension required but I ask for some agreements in return that benefit my case and speed it along more quickly. Usually the brokerage firm lawyer agrees with my requests and my client is much better off because of it.
As part of the Answer, the brokerage firm has the right to file a counterclaim against the investor or a third-party claim against a third party who may bear responsibility for part of the damages. It is not uncommon for brokerage firms to ask for expungement of the brokers record in their Answer and also to ask that attorney’s fees be awarded to them for having to defend the case. Although I have seen a number of securities arbitration awards where the panel has assessed attorney’s fees against the investor/claimant, it has usually been for it egregious situations, like where the claimant simply didn’t respond to discovery or the claim was frivolous because it was brought against the wrong party.
Expungement of a broker’s record has become a big issue of late. It used to be that when I filed an arbitration claim, if I did not name the stockbroker as a party to the claim, his record would not be impacted. Now, regardless of whether the stockbroker is a named party, if the stockbroker is identified in the body of complaint as having done something wrong, the stockbroker is required to report the complaint on his record. Since myself and many of my colleagues do not typically name stockbrokers as parties (for a whole host of reasons), brokerage firms strive to have their brokers records expunged so that their records are not tainted. Negotiation for expungement extends into settlement talks, as well.
After the Statement of Claim and Answer is filed, the next significant event in a securities arbitration is the selection of the arbitrators. This is time-consuming task because significant research needs to be done into each arbitrator to determine how high to rank the arbitrator. This requires reviewing the arbitrator’s background, doing Google searches on the arbitrator, reviewing all of the arbitrator’s prior arbitration awards, and talking to lawyers who have had arbitrator on their own cases. Each party separately ranks the arbitrators privately. After FINRA receives each of the parties’ rankings, FINRA appoints the panel based on the rankings.
The next big event in a securities arbitration is what’s called the Pre-Hearing Conference. This is a telephone conference between the arbitrators and the lawyers only. The purpose is to schedule the arbitration hearing and other deadlines related to the case.
There are pre-existing deadlines for production of documents that each side must comply with. Very early on, I make my clients aware of this production requirement so they can get busy finding what they need to find.
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