If you believe that a broker or brokerage firm has treated you unfairly, you may have a claim for money damages. Depending on your exact situation, you may wish to seek damages in arbitration through the Financial Industry Regulatory Authority (FINRA). FINRA is a not-for-profit organization sponsored by the government to oversee U.S. broker-dealers.
In a FINRA arbitration, you make your claim before a neutral fact-finder called an arbitrator (or a panel of three arbitrators) instead of before a judge or jury. Arbitration is typically less expensive, faster, more private and less complex than courtroom litigation. Once the arbitrator makes a decision, called an award, that decision generally can’t be appealed.
What is discovery?
Like courtroom litigation, the FINRA arbitration process involves something called “discovery.” Discovery is a process where each party asks the other for information related to the dispute. Each side is required to give over the requested information unless they object and the arbitrator rules in their favor.
You can use the discovery process to obtain information you may need to win your case. The broker or brokerage you are having a dispute with is required to share what it knows about your case, as long as you ask.
There are some limitations. For example, you can’t get information that is protected by attorney-client privilege. However, if your broker or brokerage has some information you need to prove your case, they are generally obligated by law to hand it over.
What kinds of evidence can I get from my broker?
FINRA’s discovery guide lays out some rules for consumer cases. There are some things the broker or brokerage has to produce in virtually every case, such as:
- Any agreements you have with the brokerage, such as account opening agreements, trading authorizations and powers of attorney
- Any documents relating to your investment risk tolerance
- Any documents relating the trading strategies that were recommended
- Research reports, performance or risk data, sales materials and the like, even if they are marked “internal use only”
- Supervisory, managerial or compliance documents
- Any analyses or reconciliations of your account
- Internal audit reports expressing any concerns about your account
- Records of relevant disciplinary actions
- Records of regulatory investigations, charges or findings
- The compensation structure for the people who performed transactions on your behalf
Moreover, the fact that a document you want is not on this list does not mean you can’t get it during discovery.
The discovery process is a crucial part of any FINRA arbitration claim. Your lawyer will work closely with you on what information to ask for.