Most people know that it is a good idea to hire an attorney when entering contracts, creating a will or trust, or engaging in litigation. What you may not know is that you can, and often should, hire an attorney for arbitrations. With increasing frequency contracts contain arbitration provisions that require you to resolve any dispute through arbitration rather than through litigation. For example, when you retain the services of a broker or sign a contract with your financial advisor, that contract likely contains a FINRA arbitration clause.
The Financial Industry Regulatory Authority (FINRA) is an independent regulator of security advisors and securities firms doing business in the United States. When an investor seeks securities sales advice or purchases a security, such as stock, equity, or corporate bonds, the investor and his advisor and/or the securities firm enter into a contract. Typically the contract will include a provision stipulating that any dispute arising under the contract will be subject to the rules of FINRA.
When a conflict arises under the contract, such as if an advisor recommends an unsuitable investment, FINRA has three dispute resolution options: (1) the investor can file a complaint with FINRA against the advisor or the broker company, this is not litigation but allows FINRA to look into your complaint; (2) the investor can proceed to mediation; or (3) the investor can decide to arbitrate the conflict.