Securities Mediation


Securities mediation is a pre-hearing dispute resolution process, sponsored by the Financial Industry Regulatory Authority (FINRA),that provides investors with the ability to settle grievances with brokerage firms concerning the handling of their investment accounts. Securities mediation allows investors the opportunity to control the potential costs of litigation and the outcome of their dispute before it is decided by a judge or arbitration panel. Securities mediation is a popular methodology to resolve securities disputes with brokerage firms and/or financial advisors. Klayman & Toskes, P.A. has extensive experience representing investors in FINRA securities mediations.

Securities mediation is typically an informal, voluntary, and non-binding process where each party has a chance to tell the pont of view concerning the handling of their investment accounts an impartial and neutral mediator. Mediators are individuals who have specialized knowledge related to securities industry rules and regulations. Securities mediation allows the parties a great deal of control in the process by allowing them to select a mutually agreeable mediator who is knowledgeable about securities disputes. Unlike a judge, though, a mediator has no actual authority. If, at the end of a mediation conference, any party refuses to enter into a settlement or accept a mediator’s proposal, there is no obligation to settle the dispute; and the arbitration or lawsuit will continue without any disclosure that either side was willing to settle the claims. However, if the mediation is successful, the client avoids the risk of litigation and arbitration as well as the costs associated therewith. In the securities mediation process both investors and brokerage firms must agree upon:

  • who is the mediator;
  • time and location of mediation; and
  • terms of the settlement.

In addition, securities mediation can be more expeditious and less costly than securities arbitration or litigation. If the parties agree to mediate, they will not give up any right to arbitrate or litigate if they cannot reach a satisfactory settlement.

Mediators frequently highlight how litigation or arbitration can be costly, contentious, with the outcome unknown. FINRA statistics have determined that a significant number of cases are resolved at mediation. Klayman & Toskes, P.A. has a track record of success for its clients through mediation resulting in an expeditious and cost-effective resolution to client securities-related disputes. According to FINRA, “the mediation program has achieved an 80% success rate — parties who mediate in the forum resolve four out of every five cases.”

Securities Mediation Process

The securities mediation process is not formal in nature which allows the skills of the mediator to provide a successful outcome. The mediator selected is an individual with skills specific to the issues in controversy. The mediator’s role is to guide the parties toward their own resolution. Through joint sessions and separate caucuses with parties, the mediator helps both sides define the issues in dispute, with an understanding of the other side’s position and the weaknesses in their own position which helps move both parties closer to a resolution. Mediators might also discuss with both parties what they believe might be the outcome in a hearing, if the parties are unable to reach a settlement.

Most frequently, mediators start with a joint session used to introduce themselves and the parties, set the rules of engagement and the agenda. The joint session begins with both parties’ lawyers speaking directly to the litigants on the opposing side which helps define the issues and positions, in their own words before the mediator begins to express their point of view. After joint sessions the two parties move to separate rooms, known as caucuses. The mediator will carry messages—offers, counter offers, questions, demands, and proposals—between both sides to help the parties move closer to resolution.

The mediator has no authority to decide the outcome of the mediation process or even compel the parties to resolve the dispute. Mediation is non-binding, until parties come to an agreement. If the dispute is not resolved, the claimant has preserved the right to pursue arbitration. A typical mediation process includes the following stages:

  • Initiate a Mediation
  • Mediator Selection
  • Mediation Sessions
  • Settlement or Impasse.

Klayman & Toskes, P.A. can help you determine whether securities mediation is an effective way to resolve securities-related disputes between investors and brokerage firms and their financial advisors. If an investor suffers losses as a result of violations of FINRA sales practice rules and regulations they may be able recover their losses through an arbitration claim or resolved in a securities mediation.

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