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SIE practice questioneasyArbitration

Under FINRA rules, disputes between a customer and a broker-dealer are most commonly resolved through which process?

  1. AFINRA arbitration✓ Correct answer
  2. BInternal review by the firm's compliance department only
  3. CMediation by the SEC
  4. DCivil litigation in federal court
Explanation

Why A — FINRA arbitration

FINRA operates the largest securities dispute resolution forum in the United States. Most customer agreements with broker-dealers contain a predispute arbitration clause, requiring disputes to be resolved through FINRA arbitration rather than in court. Arbitration is generally faster and less expensive than litigation. Mediation is voluntary and facilitated by FINRA (not the SEC). Internal compliance review alone is not sufficient for formal dispute resolution.

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