What is the difference between mediation and arbitration?


There are different ways to resolve securities related disputes and two of those options are mediation and arbitration. Mediation and arbitration are two forms of alternative dispute resolution.

The differences between arbitration and mediation

Mediation and arbitration are proceedings typically used to resolve securities disputes with the Financial Industry Regulatory Authority (FINRA). Victims of broker misconduct; unsuitable investments, misrepresentation, brokerage firm failures to supervise or brokerage firm negligence; stock manipulation; hedge fund fraud; IPO fraud; and other types of misconduct are able to resolve their claims through arbitration or mediation.

While litigation can be time-consuming, arbitration and mediation can be a quicker process. Both are used to resolve disputes in different ways.

  • Arbitration: Arbitration is typically a binding process during which an arbitrator, or panel of arbitrators, render a binding decision after hearing the dispute.
  • Mediation: Mediation is a non-binding process during which a mediator serves as a third-party neutral to help parties to the dispute facilitate a resolution of their dispute and to resolve their concerns.

Choosing what suits your case the best

Both arbitration and mediation are alternatives to court proceedings. In addition to being a less time-consuming process, both arbitration and mediation are private forums (while courts are public) and less costly alternatives to a court proceeding. They can also help the parties avoid a civil trial. They are commonly less acrimonious. However in arbitration and mediation the scope of discovery is more limited and the parties give up the right to a jury trial. Whether to mediate or arbitrate (or do both) is determined on the specific facts of each case and the pocketbook of the client.