investing

4 steps to securities arbitration

Step 2: Gather evidence

A claim is only as good as the evidence you have to support it. Keith Loveland, an attorney with Loveland Consulting in Minneapolis, says you'll need to gather all your brokerage statements, correspondence between you and your broker on the disputed investments, and other relevant paperwork, such as notes you took during or after phone conversations or meetings with your broker.

On the other side, your broker will gather evidence as well, including documents you signed to open an account or to buy the securities in dispute, says Loveland. Your broker's attorney will look at your investment history, including what types of investments you made with other brokers, to try to undermine your claim, says Ewusiak.

"They are going to be aggressive and both sides will pull out all the stops to make their positions known," he says.

Step 3: Work through the process

It can take eight months to a year to get a hearing for claims of more than $25,000, says Tepper. Small claims are decided within a few months.

Arbitration is different from a lawsuit, Tepper adds. There is no judge. Instead, each party is given a list of arbitrators from which to choose. A single public arbitrator decides cases of $25,000 or less, while a panel of three -- one from industry and two from the public -- decides cases larger than $25,000, Ewusiak says. The public arbitrators must not have worked in the securities industry for at least five years.

The hearing process can take one day to more than a week, depending on the complexity of the claim, says Loveland. Generally, you and your broker will testify as well as any expert witnesses.

Step 4: Receive the decision

Within 30 days of the hearing, the arbitrators will issue a decision, according to Tepper. If you win, you should receive any funds due to you within 30 days. Either side has 30 days to appeal, but the rules regarding arbitration make it difficult for an appeal to succeed. Because appeal grounds are so limited, most parties don't.

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