Securities dispute resolution: Response

Opposing party files a response

Originally prepared by Lucia Benabentos of the Cornell Law School Securities Law Clinic.

After the complaining party, or claimant, files a Statement of Claim and pays the required fees, the opposing party, or respondent, is served with the Statement of Claim, a cover letter explaining the process and setting a time for reply to the claim. Respondent must file an appropriate response with FINRA within 45 days of receipt of the statement of claim. Such response should include a signed and dated Uniform Submission Agreement and an answer specifying the relevant facts and available defenses to the Statement of Claim. Additionally, the respondent may include any additional documents supporting the answer to the Statement of Claim. Parties that fail to answer in the time provided may be subject to default proceedings.

The response may also allege counterclaims against the claimant. In such a case, additional facts and damage requested should be included. The claimant must in turn directly serve any answer to a counterclaim on the other party within 20 days of receipt of the counterclaim. At the same time, the claimant must file the answer to the counterclaim including the relevant facts and available defenses to the counterclaim. He or she should include any additional documents supporting the answer to the counterclaim.

Any of the parties may amend their original submissions in order to respond to new evidence, new claims or information provided by the other party as a response to the documents. According to FINRA, amendments may be made before a panel of arbitrator is chosen. Once a panel is appointed, the party must seek approval from the panel before amending any documents. The deadlines for answering an amendment vary depending on whether the amendment was made before or after an answer was filed, and before or after a panel was appointed.

While amendments are not uncommon, it is extremely important that neither party attempt to keep information out of the proceedings in the hopes of amending the documents at a later point. Special precaution should be paid to timelines as these are very specific and may determine whether new, special information is submitted to the panel or not.

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