Code of Mediation Procedure

Mediation operates alongside arbitration as a settlement-facilitation forum, not a replacement for it. The mediator does not decide the dispute; only a settlement agreement among the parties does.

Voluntary Mediation

Mediation under the Code is strictly voluntary and requires the written agreement of all parties.

Core Voluntariness Principles

• No party may be compelled to participate in mediation, whether by FINRA, by any mediator, or by any other party
• No party may be compelled to settle by FINRA, by any mediator, or by any other party
• The mediator's role is to facilitate, not to decide; the mediator has no authority to impose a settlement on unwilling parties

Eligible Disputes

Any matter eligible for arbitration under the Customer Code or Industry Code may also be submitted to mediation, including:

• Any part of an arbitration matter (parties may mediate one issue while continuing to arbitrate others)
• Any related dispute, including procedural issues
• Disputes the parties want to resolve before formal arbitration even begins

Submission Agreement

Mediation is submitted when the Director receives an executed Submission Agreement from each party.

• The Submission Agreement is the parties' written commitment to mediate the matter under the FINRA framework
• Without a Submission Agreement signed by every party, FINRA does not administer the mediation
• The agreement defines the scope of what is being mediated, identifies the parties, and acknowledges the Code's procedural rules

Exam Tip: Gotchas

• Mediation is always voluntary, even where arbitration is required. A customer may demand FINRA arbitration under the Customer Code (which the member must accept), but neither side can force the other into mediation. Mediation requires bilateral written agreement. The mediation process never overrides the arbitration requirement.
• The mediator does not decide the dispute. Only the parties' agreement resolves the matter. If no settlement, the dispute may proceed (or continue) in arbitration or court. A mediator cannot impose terms; that is the fundamental difference between mediation and arbitration.

Effect of Mediation on Arbitration Proceedings

The default rule is that submission of a matter to mediation does NOT stay or otherwise delay any arbitration of the matter pending at FINRA.

Concurrent Proceedings by Default

Mediation and arbitration may proceed concurrently unless the parties agree otherwise (typically by stipulating that the arbitration is held in abeyance pending mediation outcome).

When Parties Want a Stay

If parties want the arbitration on hold during mediation, they must expressly agree. A common mechanism is a Mediation Stay stipulation filed with the FINRA arbitration case file.

• The stipulation typically pauses hearing dates, discovery, and motion practice
• The stipulation must be in writing and submitted to the FINRA arbitrator or panel
• Without the stipulation, all arbitration deadlines continue to run

Exam Tip: Gotchas

• Mediation does NOT automatically pause a pending FINRA arbitration. If the parties want the arbitration on hold during mediation, they must expressly agree (often via a Mediation Stay stipulation). Otherwise, hearing dates, discovery deadlines, and motion practice continue running while mediation proceeds. A respondent who relies on an unstayed mediation as an excuse for missing arbitration deadlines may lose by default.

Mediation Ground Rules and Confidentiality

The Code establishes the procedural ground rules for mediations administered under the framework.

Confidentiality of Mediation Communications

Statements, proposals, and documents prepared for or shared in mediation are generally not discoverable or admissible in subsequent proceedings, subject to limited exceptions.

• A settlement offer made during mediation is not admissible in the parallel arbitration
• A document prepared specifically for mediation (a confidential settlement memorandum, an "eyes only" mediator brief) is not discoverable
• A document that already existed independent of the mediation does not become privileged just because it was used in mediation

Why Confidentiality Matters

Confidentiality is the architecture that makes candor possible:

• A party who fears that a mediation offer will become evidence at trial will not make meaningful offers
• The confidentiality rule allows parties to explore settlement values without compromising their litigation positions

Settlement Enforceability

A settlement reached in mediation is enforceable as a contract.

• If the parties sign a written settlement agreement, it binds them just like any other contract
• If no settlement is reached, the dispute may proceed (or continue) in arbitration or court, with the mediation communications largely inadmissible

The Mediator's Role

The mediator does not decide the dispute; the mediator facilitates settlement.

• Only the parties' agreement resolves the matter
• The mediator may shuttle offers, suggest framings, identify common ground, and propose settlement structures
• The mediator does not issue an award, ruling, or decision

Think of it this way: Mediation is a structured negotiation with a neutral facilitator. The arbitration system imposes a binding decision when parties cannot agree; the mediation system helps parties reach their own agreement, but it cannot impose anything. If mediation fails, the parties go back to arbitration (or court) with the underlying dispute intact.