At the Arbitration Hearing


     Disputes between an investor and her stockbroker (or investment advisor) are decided by an arbitration hearing, not by a trial in a court of law. Arbitration resembles a trial but is less formal. The investor’s claim is decided by one or more arbitrators, who are neither judges nor jurors but who know the securities field and are committed to being impartial.

     Unlike a lawsuit, arbitration does not require a party to sit for a deposition—that is, does not require her to be questioned by opposing counsel in front of a court reporter before the trial takes place. That eliminates a source of strain for the investor that a court litigant must face.

     Another difference between court and arbitration is that the rules of evidence are relaxed at arbitration. In court every question to a witness, and every document that is introduced in evidence, are governed by complicated rules. Arbitration relaxes those rules though it does not eliminate them entirely.

     A third difference between the two forums is that there are few motions in arbitration. In court, in contrast, time-consuming motions are made that are argued orally and in writing.

     The result of these differences is that arbitration is cheaper and faster than litigation in court.

The Two Days or More of Arbitration

     Two consecutive day are typically scheduled for an arbitration hearing, though more time may be needed. As in a trial, each side gives an opening statement. Then the parties present their cases, calling witnesses and submitting documents in their favor. The opposing side may cross-examine a witness, and an arbitrator may also question a witness.

     In most cases the investor describes her relationship with her investment professional and explains what she expected from the professional. The defendant’s testimony typically usually covers the same ground, though often giving a very different account of what happened.

     The attorneys use their witnesses’ testimony to introduce documentary evidence, asking a witness to identify a document and then submitting it to the arbitrator to be accepted in evidence. When the questioning is over, the parties may submit charts or summaries that are not evidence themselves, but that re-state the evidence that was presented in order to make it easier to grasp.

     When the hearing is finished, the arbitrators decide the case. They usually reach a decision within thirty days of the hearing though they are not required to do so.


     There is only a limited right to appeal an arbitration decision, so in most cases the investor cannot challenge the decision.


     An arbitration hearing should not be an ordeal. If the investor and her counsel have prepared their case well, if the investor tells the truth, and if she goes to the hearing already aware of all evidence that can be used against her, she should emerge from the hearing with her credibility intact.


All Content found in this website is the sole opinion of the author and for informational purposes only.


Attorney Stephen A Katz
Stephen A Katz, P.C.

111 John Street, Suite 800
New York, NY 10038-3180
(212) 349-6400
(800) 251-3529
(646) 308-1170 (fax)

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