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SIE practice questionmediumArbitration vs. Mediation

What is a key difference between FINRA arbitration and FINRA mediation?

  1. AMediation is mandatory before any arbitration proceeding can begin
  2. BArbitration is voluntary; mediation results in a binding decision
  3. CMediation is voluntary and non-binding; arbitration results in a binding decision✓ Correct answer
  4. DBoth arbitration and mediation result in non-binding recommendations
Explanation

Why C — Mediation is voluntary and non-binding; arbitration results in a binding decision

Mediation is a voluntary, informal process where a neutral mediator helps the parties reach a mutually agreeable settlement — it is non-binding. Arbitration, on the other hand, involves arbitrators who hear evidence and render a decision (called an award) that is final and binding, with very limited grounds for appeal. Mediation is not required before arbitration, though parties may choose to try mediation first.

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