Do I have to arbitrate my dispute with my brokerage firm?

Who does this apply to?

Anyone registered or applying for registration with a FINRA member firm, officers, directors, branch managers and others in similar roles, and people who have left: “a person formerly associated with a member is a person associated with a member” (Rule 13100(u)).

The rules

• The default is arbitration. A dispute “must be arbitrated under the Code if the dispute arises out of the business activities of a member or an associated person” and is between a firm and an associated person (Rule 13200(a)).
• Statutory discrimination claims are not required to be arbitrated under FINRA’s rules. “Such a claim may be arbitrated only if the parties have agreed to arbitrate it, either before or after the dispute arose” (Rule 13201(a)). A separate arbitration agreement in your employment papers can therefore still send a discrimination claim to arbitration.
• Sexual harassment and sexual assault claims are your choice. Even if you agreed to arbitrate before the dispute, you may elect not to (Rule 13201(c)), and federal law makes any predispute arbitration agreement unenforceable at your election for such a case filed under federal, tribal or state law (9 U.S.C. § 402(a)). The federal law applies to claims that arose or accrued on or after March 3, 2022.
• Whistleblower claims under statutes that bar arbitration agreements can be arbitrated only by an agreement made after the dispute arose (Rule 13201(b)). Sarbanes-Oxley is one: “No predispute arbitration agreement shall be valid or enforceable” for a claim under it (18 U.S.C. § 1514A(e)(2)).
• Class and collective actions stay out of FINRA arbitration. “Class action claims may not be arbitrated under the Code,” nor may collective actions under the Fair Labor Standards Act, the Age Discrimination in Employment Act or the Equal Pay Act, and the firm may not enforce an arbitration agreement against a class or collective member while the case is pending (Rule 13204).
• Court is still available for emergencies. Either side may ask a court for a temporary injunctive order in a dispute that must otherwise be arbitrated, but must file for permanent relief with FINRA at the same time (Rule 13804(a)).

What does arbitration cost?

You pay a filing fee when you bring the claim: $975 for a claim of $50,000.01 to $100,000, and $1,425 for $100,000.01 to $500,000 (Rule 13900(a)). The firm pays a member surcharge and a process fee that the panel may not shift to you (Rule 13901; Rule 13903). Hearing session fees are divided by the panel in its award (Rule 13902). The Director may defer the filing fee on a showing of financial hardship, and part of it is refunded if the case settles early.

What is unsettled?

• Separate class and collective waivers. Rule 13204 keeps class claims out of FINRA arbitration, but it also says it does “not otherwise affect the enforceability of any rights under the Code or any other agreement.” Whether a class waiver in your own employment agreement is enforced is a separate question.
• Dodd-Frank retaliation claims. Unlike Sarbanes-Oxley, the Dodd-Frank anti-retaliation provision contains no bar on predispute arbitration agreements (15 U.S.C. § 78u-6(h)), so an arbitration agreement may reach it.

What should I gather?

• Your Form U4 and any separate arbitration agreement, offer letter or employment agreement.
• Your compensation and deferred-compensation plans, and any promissory note.
• The date each event happened. Sarbanes-Oxley complaints are due within 180 days (18 U.S.C. § 1514A(b)(2)(D)).

Employment rights for financial advisors and registered representatives: the full guide

New York employment claim deadlines