According to a recent article in Investment News, the Financial Industry Regulatory Authority (FINRA) plans to ask the Securities and Exchange Commission (SEC) for approval to appoint all public arbitrator panels for non-broker claims. This is a move that has been long sought by plaintiff securities lawyers and one that most observers believe will help level the playing field in securities arbitration.
The full FINRA press release appears below:
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) will file a rule proposal next month that would allow all investors filing arbitration claims the option of having an all-public panel, greatly increasing investor choice in the FINRA arbitration program. The rule proposal, which will be filed for approval with the Securities and Exchange Commission (SEC), would expand to all investor claims a two-year-old FINRA pilot program that gives investors filing an arbitration claim against certain firms the option of choosing an all-public panel.
“Giving each individual investor the option of an all-public panel will enhance confidence in and increase the perception of fairness in the FINRA arbitration process,” said Richard Ketchum, FINRA Chairman and Chief Executive Officer. “All investors will have greater freedom in choosing arbitration panels, and any investor will have the power to have his or her case heard by a panel with no industry participants.”
If approved by the SEC, the rule would give investors the option of choosing an arbitration panel that has two public arbitrators and one non-public arbitrator, as is now the case, or choosing to have their case heard by an all-public panel. The current pilot program involves 14 firms that agreed voluntarily to a set number of investor cases that did not involve individual brokers. The proposed rule would apply to all investor disputes against any firm and any individual broker. It would not apply to arbitration disputes involving only industry parties.
Since the Public Arbitrator Pilot Program began in October 2008, slightly more than 60 percent of investors eligible to participate have opted in, resulting in almost 560 cases to date. Investors opting into the pilot, given the power to eliminate all non-public arbitrators, still chose to have one non-public arbitrator on their panel about 50 percent of the time. The pilot program was originally set to conclude after two years. However, the participating firms agreed recently to extend the pilot program for an additional year while the rule making process goes forward.
FINRA, the Financial Industry Regulatory Authority, is the largest non-governmental regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing and enforcing rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and registered firms. Currently, there are roughly 6,200 FINRA arbitrators – 2,700 are non-public and 3,500 public. For more information, please visit www.finra.org.
The attorneys at Colling Gilbert Wright & Carter have a practice devoted exclusively to filing and litigating FINRA arbitration claims on behalf of investors. If you suspect you have lost money in your investment account due to negligence or fraud on the part of your investment advisor, please contact our office for a case evaluation. Thank you.