The relatively inexpensive costs involved in initiating an arbitration have made it an economically viable alternative for investors who wish to pursue cases against their financial representatives.
Costs are generally divided into a few categories:
1. Representation fees- These include fees charged by either an attorney or an individual or firm which represents the investor in the arbitration. Most of these representatives will offer a free initial consultation in order to assess the merits of an investor's case. If retained, the representative may usually be paid per hour (between $150-$300/hour) or on a contingency basis (typically between 30-40% of any settlement or arbitration award rendered). Fees vary slightly due to the nature and complexity of the cases and time involved.
2. Forum Fees- These are divided into two parts. The first is the filing fee and the second is the hearing session deposit. These fees are paid to the self regulatory organization which will hear the case and increase as the amount in dispute increases. For a case with about $100,000 in dispute, the filing fees and hearing session deposits total approximately $1,000. The hearing session deposit can be increased if the arbitrators feel that additional sessions are necessary.
3. Expert Witness fees- Depending on the complexity of the case and the amount in dispute, it may be necessary to retain an expert witness. Fees generally range anywhere from several thousand dollars up to about $15,000. These figures vary case to case and in different geographical regions.
4. Cross Claim Liability- While it is extremely rare, it is possible that an investor making a claim could be subject to a cross claim by the responding broker/firm, thus exposing the investor to potential liability.
5. Miscellaneous/Administrative expenses- These are relatively minor expenses involved in actually putting the case and claim together for filing.
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