Can a FINRA Securities Arbitration Award be Appealed?

Yes, technically, but in reality, no. Under the law, a FINRA securities arbitration award can be appealed, but practically speaking, arbitration awards are rarely changed when appealed. Indeed, under the Federal Arbitration Act and the Florida Arbitration Act, a party has the legal right to file an action in court to vacate or modify an arbitration award. Arbitration awards, however, are very difficult to overturn or modify.

Indeed, federal and state courts give substantial deference to an arbitration panel’s award, notwithstanding that arbitration panels are not necessarily bound to follow the law and can even misapply it with impunity. Instead, an arbitration panel may enter an arbitration award that it believes results in a fair or equitable outcome.

FINRA Securities Arbitration Award

As a result, an investor who brings a securities arbitration claim in the FINRA forum should expect finality when the panel makes its award, and the investor cannot reasonably expect to convince a court to change the result of a panel’s arbitration award.

The limited circumstance in which an arbitration award may be overturned or modified, other than to fix a clerical error, is when there has been proven corruption or a substantial bias by an arbitrator that would make it unconscionable for the arbitration award to remain as written. This standard is nearly impossible to satisfy and petitions to vacate or modify an arbitration award are denied more than 99% of the time.

The lesson is that an investor and his or her lawyer must put their best foot forward to win the underlying arbitration in the first instance. This is because, regardless of whether the facts or law are applied correctly or incorrectly by the arbitration panel, the panel’s decision likely will be the final result in the case.