New York, NY securities attorney Jenice L. Malecki talks about who is subject to FINRA or AAA arbitrations. She highlights that it is important to understand who is subject to FINRA or AAA arbitration, noting that individuals arrive at these forums in different ways. Arbitration is fundamentally a creature of contract, meaning it is not open to everyone as a court is; some form of agreement is required to enter the process. This agreement can exist before a dispute, when contracting with someone, or after a dispute, if both parties consent to resolve the matter through arbitration.

For public investors, signing a new brokerage contract typically includes an agreement to arbitrate any disputes with the brokerage firm. Uniquely, under FINRA rules, public investors can even request arbitration without having signed such an agreement, and the brokerage firm is obliged to arbitrate, which is a benefit because arbitration is generally quicker and less costly than court litigation.

Industry professionals, upon signing their Uniform Application for Securities Industry Registration (Form U4), agree that disputes with clients or broker-dealers will be resolved through arbitration. This also covers license-related disputes, such as seeking expungement for a customer complaint or termination issue.

For registered investment advisors, most firms include arbitration agreements, though typically through the American Arbitration Association (AAA) rather than FINRA. AAA arbitration is contract-based and generally more expensive than FINRA arbitration. FINRA, however, will allow its forum to be used for registered investment advisors post-dispute if both parties agree. This framework broadly outlines how individuals and professionals become subject to arbitration.