The modern securities industry is complex, varied, lucrative, and very highly regulated because it is so integral to our economy. It is also, not surprisingly, the source of many disputes both between industry members and the investing public, and between members of the industry. While most of the publicity about disputes in the industry focuses on claims by investors against an industry members, a considerable number involve disputes between brokerage firms, between brokers and brokerage firms, and by regulatory bodies and both brokers and brokerage firms.

Arbitration

The rules of the Financial Industry Regulatory Authority (FINRA) require arbitration for adjudicating the vast majority of internal securities industry disputes. Arbitration at FINRA is mandatory for disputes which:

• Involve broker versus broker, brokerage firm versus brokerage firm, or broker versus brokerage firm.
• Derive from the conduct of the parties’ business activities in the securities business.

Even without an arbitration agreements disputes between or among members and associated persons can be arbitrated at FINRA as long as the case is filed no more than 6 years from the date from which the claims arise.

Disputes Between Brokerage Firms

There are three basic types of disputes between brokerage firms:

• Disputes over the terms of any business the firms conduct directly between themselves.
• Disputes over the respective rights of the firms when they operate jointly in dealings with investors, which is common when public securities offerings are so large that underwriting is syndicated or handled by more than one firm.
• Claims by one firm that another firm is raiding its employees/brokers.
  

Disputes Between Brokers

Individual brokers interact in many ways, and any interaction in a field that handles huge sums of money can lead to disputes. These may involve:

• Referral agreements
• Purchases of customer “books” from retiring brokers

Disputes Between Brokers And Their Employing Firms

The nature of the relationship between brokers and the firms for whom they work generates disputes over many, many things. Among the most common subjects of disputes are:

• Compensation, including performance and hiring bonuses.
• Compliance with restrictions on competition.
• Broker use of proprietary information.
• General employment conditions (including alleged discrimination on various grounds).
• Whether brokers are complying with the firm’s rules and the laws and rules of the securities industry.