Securities Mediation

Francine Schlaks is a mediator and arbitrator for FINRA. She also obtained her Series 7 license.

Business in the securities industry for the most part is conducted fairly, efficiently, and in a manner that satisfies everyone involved. Occasionally, however, disputes or problems arise. For example, you may disagree with how your broker handled a transaction. If you cannot resolve the matter yourself, there are effective alternative dispute resolution mechanisms, which usually result in a swift conclusion without the inconvenience and expense of a court “battle.”

Before entering into arbitration or litigation, consider mediation–a natural first step in the dispute resolution process. Mediation is an informal process in which a trained and impartial mediator facilitates negotiations between disputing parties, helping them to find their own mutually acceptable resolution. What distinguishes mediation from other forms of dispute resolution–principally, arbitration and litigation–is that the mediator does not impose the solution, but rather, helps make it possible for you and the other party to form and accept a solution yourselves.

Mediation is not structured rigidly. The actual process varies from case to case, depending largely on the mediator’s “style” and the frames of mind of those involved. In some cases, you and the other party might meet to discuss the issues face-to-face, with the mediator there to help you remain focused and calm. In other cases, the mediator might hold private caucuses with each of you separately, and would then carry messages–offers, counter offers, questions, demands, and proposals–back and forth between you. Often, the mediation process consists of a combination of both methods, plus any other technique the mediator feels is useful in moving the negotiation forward.

The mediator’s role is to guide you and the other party toward your own solution by helping you to define the issues clearly and understand each other’s position. Unlike an arbitrator or a judge, the mediator has no authority to decide the settlement or even compel you to settle. The mediator’s “key to success” is to focus everyone involved on the real issues of settling–or the consequences of not settling. While the mediator may referee the negotiations–defining the terms and rules of where, when, and how negotiations will occur–he or she never determines the outcome of the settlement itself.

The mediator also serves as an agent and mirror of reality. With the help of the mediator, disputants often see things they initially did not want to see (like the weaknesses of their own case and the strengths of the other party’s case) or they get a clearer view of matters previously distorted by anger and emotion. Since securities industry mediators are knowledgeable in the areas of controversy, they can often give each side an expert, but unbiased, view of the strengths and weaknesses of the case overall.

Historically, business disputes submitted to professional mediation services have had a settlement rate of about 80 percent. Mediation experts attribute this to the parties’ complete control over the process, costs, and outcome. If you feel good about the process, you will likely approach it with enthusiasm and good intentions. Approximately eight out of ten cases settle within a few weeks to a few months of the formal agreement to mediate–when everyone approaches the mediation table in earnest.

You may consider mediation successful even when the dispute does not settle fully in the mediation process. Sometimes parts of a dispute settle in mediation, leaving fewer or less severe differences to be settled in arbitration or litigation–translating into huge savings of time and money for everyone involved. Generally, the mediation process improves communications, helps to narrow the issues involved, clears up misunderstandings, diffuses emotion, and defines areas of agreement so that future dispute resolution efforts, especially in arbitration, can become more efficient, effective, and more likely to produce settlement down the road.