Securities Mediation

If investors have evidence that a broker is involved in misconduct in handling their investment, mediation may be recommended to resolve the dispute. Mediation is a dispute resolution process that is more of a negotiation than a judgment.

It is typically a pre-hearing dispute resolution process, as the outcome is considered a mere proposal that either party can reject. It is, however, faster and less expensive than arbitration or litigation.

In mediation, the parties control:

  • The choice of mediator
  • Location and date for the mediation
  • How the dispute will be resolved

Our lawyers have extensive experience representing investors in FINRA mediations; get in touch today for a free evaluation of your case.

Types of Mediation

Mediators employ different approaches to help the parties resolve their disputes. They are;

Facilitative Mediation

This is a form of mediation where the mediator does not offer any opinion but serves as an intermediary between the parties communicating their demands, offers, and counteroffers.

In this case, the mediator will guide them to reach a middle ground.

Evaluative Mediation

In evaluative mediation, the mediator determines the issue and demands for supporting evidence from each party.

The mediator will evaluate each party’s strengths and weaknesses to offer an opinion on the likely outcome of the dispute if they insist on proceeding to arbitration or a court of law.

Arbitration vs. Mediation: The Difference

Securities Arbitration and Mediation are both means of resolving securities trading issues between brokerage firms and investors. The major difference between the two is that the awards rendered in arbitration are final, while parties can dispute the settlement in mediation.

Arbitration awards are also more likely to come with an official punishment, such as suspension of license, while mediation settlements are often monetary. 

Mediation Process

There are four major processes of mediation:

  • Initiation: The parties must file a Request for Mediation to commence the process. It is also possible to withdraw a case from arbitration to mediation.
  • Mediator Selection: Once the Request is approved, the parties will be given the autonomy of choosing a mediator from FINRA’s roster
  • Mediator Sessions: The session often started with setting ground rules for the mediation. It involves defining the issues and determining the parties’ positions. During the sessions, parties are moved to separate caucuses while the mediator conveys offers and counteroffers between the two sides.
  • Settlement: If a resolution is reached between the parties, the mediator will announce a settlement to resolve the dispute.
  • Impasse: This is when the parties are unable to resolve their dispute. The case is usually moved to arbitration or a court, depending on the clauses in the agreement.

Rules of Mediation

FINRA’s Mediation Program is guided by its Code of Mediation Procedure which states;

  • Depending on the parties’ agreement, mediation can suspend activity in arbitration until the mediation concludes, or both processes may continue on parallel tracks.
  • Parties may represent themselves in mediation or be represented by an attorney, or state law may dictate others who can represent a party in mediation.
  • The Director of Mediation or the parties themselves can suggest potential mediators.
  • Mediation Ground Rules
  • The Mediation Ground Rules provide the framework for how a mediation must be conducted.
  • Parties pay an administrative fee for mediating through FINRA and are responsible for the mediator’s fee, and also for any expenses.
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