FINRA Arbitration Time Limits: Rule 12206 Explained
If you lost money due to broker misconduct, unsuitable investments, or securities fraud, you may be able to recover your losses through arbitration before the Financial Industry Regulatory Authority (FINRA).
But how long do you have to file a FINRA claim?
Understanding FINRA arbitration time limits is critical. Waiting too long could jeopardize your ability to recover.
What Is the FINRA Time Limit for Filing a Claim?
FINRA Rule 12206 governs eligibility for filing arbitration claims.
It states:
“No claim shall be eligible for submission to arbitration under the Code where six years have elapsed from the occurrence or event giving rise to the claim. The panel will resolve any questions regarding the eligibility of a claim under this rule.”
This is often referred to as the FINRA “six-year rule.”
However, it is not technically a statute of limitations.
It is an eligibility rule that determines whether FINRA will administer the case.
Does the Six-Year Period Start at the Date of Purchase?
Brokerage firms frequently argue that the six-year period begins on the date the investment was purchased.
But the rule does not say that.
Instead, it refers to:
“the occurrence or event giving rise to the claim.”
That distinction matters.
In many cases — particularly those involving complex or alternative investments — investors may not discover problems until years after purchase.
Who Decides When the Clock Starts?
The U.S. Supreme Court addressed this issue in Howsam v. Dean Witter Reynolds, Inc..
The Court held that determining when the “occurrence or event giving rise to the claim” happened is a question for the arbitration panel, not the court.
In other words:
-The triggering date is decided on a case-by-case basis.
-It is not automatically the purchase date.
Federal courts have also confirmed that FINRA Rule 12206 is not a traditional statute of limitations and may allow for panel interpretation, including discovery-based arguments.
Why This Is Especially Important for Alternative Investments
Many FINRA disputes involve:
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Non-traded REITs
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Oil and gas limited partnerships
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Equipment leasing funds
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Private placements
Unlike publicly traded stocks, these investments often:
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Do not have daily market pricing
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Appear stable on account statements
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Continue paying distributions for years
Investors may have no reason to suspect wrongdoing until:
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Distributions are reduced or suspended
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Valuations collapse
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Liquidity events reveal losses
In the case of complex investment products, the triggering “event” may occur years after purchase.
Is FINRA’s Six-Year Rule the Only Deadline?
No.
Investors must also consider:
1. Federal Securities Law Time Limits
Under Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5:
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Claims generally must be brought within 2 years of discovery
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And no later than 5 years after the violation
These deadlines can interact with FINRA eligibility rules.
2. State Statutes of Limitations
State securities and fraud laws may have their own limitation periods, sometimes as short as two years.
Depending on the facts, investors may have alternative legal avenues.
What Happens If a Brokerage Firm Challenges Eligibility?
Broker-dealers commonly file a pre-hearing Motion to Dismiss under Rule 12206 if more than six years have passed since purchase.
However, arbitration panels frequently evaluate:
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When the investor discovered or should have discovered the misconduct
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Whether misrepresentations were ongoing
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Whether later events triggered awareness
Panels are empowered to decide these issues based on the facts of the case.
How FINRA Arbitration Works
FINRA arbitration is a private dispute resolution process.
Key features:
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Claims over $100,000 are typically decided by a panel of three arbitrators
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Decisions are final and binding
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Cases often resolve faster than court litigation
The arbitration process begins with filing a Statement of Claim, which outlines the allegations and damages sought.
Frequently Asked Questions About FINRA Time Limits
How long do I have to file a FINRA arbitration claim?
Generally, six years from the occurrence or event giving rise to the claim — but that triggering event is determined by the arbitration panel.
Is FINRA Rule 12206 a statute of limitations?
No. It is an eligibility rule for arbitration, not a statutory limitation period.
Can I file if it has been more than six years since I purchased the investment?
Possibly. In certain cases, panels determine that the triggering event occurred later.
Should I wait before filing?
No. Waiting can create risk. Evaluating eligibility early is critical.
Speak With a FINRA Arbitration Attorney
Time limits in securities arbitration can be complex and highly fact-specific.
If you have questions about filing a FINRA arbitration claim, contact The White Law Group for a free consultation.
The firm represents investors nationwide in disputes against brokerage firms involving:
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Unsuitable investments
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Unauthorized trading
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Churning
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Fraud and misrepresentation
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Alternative investment losses
Do not delay evaluating your claim. For a free consultation please call 888-637-5510. For information on The White Law Group and its representation of investors in claims against brokerage firms, visit whitesecuritieslaw.com.