FINRA Securities Mediation Attorney

FINRA statistics show that historically approximately 90% of all FINRA securities arbitration claims settle in advance of a final hearing.  Fifty-three percent of these are settled directly among the parties with the assistance of counsel, and supposedly, fifteen percent through mediation.  These statistics may be misleading in that many cases settle with the assistance of mediation, and the use of a mediator outside of the auspices of the FINRA Office of Mediation and Arbitration.

Securities Mediation vs. Arbitration

The difference between Arbitration and Mediation may be confusing, especially among lawyers. Arbitration before FINRA is an evidentiary hearing where a binding and virtually unappealable award or verdict is rendered by one, or up to three, supposedly disinterested arbitrators.  Unlike the concept of “arbitration,” within the traditional court system, where the parties can reject the arbitrator’s decision and demand to go trial, in FINRA securities arbitration, the arbitration hearing is your trial.  Chances are that one party is going to be unhappy about the outcome. 

Securities mediation, however, is the ability, or prospect, of resolving investor related claims, typically pending before FINRA, through the use of an experienced and neutral securities mediator. Securities mediation is confidential and it is non-binding on the parties.  Anything said during the course of a mediation, including the existence of the mediation itself, is confidential and cannot be used or introduced generally by any party for any purpose at a final hearing or trial.

Lawyers are advocates.  However, overzealous advocacy sometimes presents an impediment to the fair and equitable resolution of investor claims, often, honestly, by both parties.  Arbitration, and the outcome of any securities arbitration or investor claim includes risk for both parties, the claimant and respondent.  FINRA securities arbitration panels often render awards that fail to appreciate the relevant evidence.   Securities mediation avoids these risks and uncertainties.

Who Are FINRA Mediators?

Mediators may act as “facilitators,” whereby they negotiate, or are the emissaries of  the trading of the parties’ respective monetary offers and demands to settle a case.  Mediators may also be “evaluative” in that they inform the parties what the mediator objectively thinks or perceives as a fair and equitable settlement of a case.  Most mediators, including most experienced securities mediators, are both facilitative and evaluative mediators.

The FINRA Office of Mediation and Arbitration has a pool of trained mediators, from which the parties submitting an arbitration to FINRA can chose or rank to conduct the mediation of their securities arbitration claims through FINRA.  Participating securities mediators through FINRA, particularly during mediation settlement month (in October), offer their services at a reduced rate.  Parties submitting their cases to mediation, under the Code of Arbitration Procedure, are not charged the hearing costs that would otherwise attach to a continuance or postponement while the parties seek to mediate their securities claim.

However, generally, in the United States, which varies by region, there are less than twenty securities mediators that mediate more than 80% of FINRA securities arbitration cases.   Many, if not all of these mediators travel across the country, or within a large geographical area, and are well known to the experienced practitioners.  For these mediators, their experience and objectivity are their “stock-in-trade,” and their opinions or observations are generally well respected by both parties.

Experienced securities mediators have the patience to listen to investors and their counsel, and the they also have credibility, generally, with opposing counsel for the securities broker-dealer, or their insurers, to candidly assess the merits of the claims and defenses associated with these claims.  As of even date, the top, or most popular, four mediators in the United States have settled more than 20,000 cases.  FINRA’s securities mediator success or settlement rate is also historically above 90%.

The Securities Mediation Process

Securities mediations are generally completed in one day.   The parties will generally send a confidential mediation memorandum to the securities mediator in advance of the scheduled mediation.  The confidential securities mediation memorandum will contain a recitation of the perceived facts in the case, authorities including the legal theories behind the relevant claims and defenses, and the most compelling documentary evidence in the support or in the defense of these claims.   Securities mediators will generally not disclose these materials, including their content, to opposing counsel without express permission.

At the beginning of any securities mediation, the mediator will generally conduct a joint session with the parties and their counsel to introduce everyone, and to agree upon the ground rules often embodied in a written mediation agreement.  Traditionally, the parties are invited to make “opening statements,” as one would do in court or at a final hearing, as to what the evidence and testimony will show, and why the investor is or is not entitled to relief.  Opening statements at a securities mediation are useful for two reasons.  First, it is generally the only time, in advance of a final hearing where counsel will be able to speak to, or address directly, the other party, with the facts and issues, without the filter or advocacy of the facts by opposing counsel.  Second,  opening statements at a securities mediation provide the parties an opportunity to see their lawyers advocate for them.  However, most, if not all, of the more experienced securities mediators have abandoned the use of opening statements at securities mediations as it tends to alienate or unduly entrench the parties or their respective counsel.

In any event, with or without opening statements at a securities mediation, the mediator will meet privately with each party and their counsel to discuss the facts and relevant evidence, and sometime during the process will invite the parties to make demands and offers (as opposed to offers and demands), which will go back and forth between the parties via or communicated through the securities mediator.

Often in response to these demands and offers, with the permission or direction of the other party, a securities mediator may show the client and their counsel important or relevant documents that may persuade a party to consider, or even re-consider the substantive merits of their claims or defenses.  In the context of securities mediation, lawyers are, or at least should be, both advocates and advisors.  Purportedly, in a successful mediation, both parties are unhappy.  One party paid more than it wanted, and the other party took less than they thought they were entitled.  For any party, a bad or marginally acceptable settlement is better than a terrible award.   Five out of six times, or 84% of the time, there is no harm when playing Russian roulette.  However, 16% of the time, someone might not like the outcome.  Litigation involves risk.

With respect to securities mediation, other than the investment of the parties’ resources, there is no risk.  In a securities mediation, at the end of the day, more than 90% of all cases settle or are resolved, and the risks, costs and uncertainties associated with adjudication by a FINRA securities arbitration panel is avoided.

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AboutNicholas Guiliano, Esq.


Nicholas J. Guiliano has more than 25 years of securities related experience, and has represented more than 1,000 public customers in claims against brokerage firms for fraud in connection with the sale of securities principally in arbitration before the Financial Industry Regulatory Authority (“FINRA”) Dispute Resolution, Inc. (formerly known as The National Association of Securities Dealers (“NASD”) Dispute Resolution, and the New York Stock Exchange (“NYSE”) Department of Arbitration.

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