FINRA—background, structure and purpose under the Customer Code and the Industry Code
FINRA—background, structure and purpose under the Customer Code and the Industry Code

The following Arbitration guidance note provides comprehensive and up to date legal information covering:

  • FINRA—background, structure and purpose under the Customer Code and the Industry Code
  • Investor disputes
  • Industry disputes
  • Advantages of FINRA arbitration proceedings
  • Challenges

The Financial Industry Regulatory Authority (FINRA) is an independent regulatory body overseeing the US securities industry. As part of its role, FINRA operates the largest dispute resolution body in the securities industry. It works to resolve monetary and business disputes between investors, brokerage firms and individual brokers, as well as disputes between and among brokerage firms and individual brokers.

The disputes are dealt with using FINRA’s own arbitration procedure. FINRA has two Codes of Arbitration Procedure:

  1. the Code of Arbitration Procedure for Customer Disputes (the Customer Code or Section 12000 of the FINRA Rules)—which governs arbitration proceedings between investors and industry parties, and

  2. the Code of Arbitration Procedure for Industry Disputes (the Industry Code or Section 13000 of the FINRA Rules)—which governs arbitration proceedings between industry parties

Investor disputes

Under the Customer Code, it is mandatory to use FINRA arbitration proceedings in certain circumstances. The Customer Code, Pt II, r 12206 states that parties must conduct FINRA arbitration proceedings where:

  1. a FINRA arbitration is required by written agreement or requested by the investor

  2. the dispute is between an investor and a member of FINRA or a person associated with a member, and

  3. the disput