FINRA Reinstates Fired Arbitrators After Further Investigation

Representing Investors Nationwide

According to a recent Reuters article, the Financial Industry Regulatory Authority (FINRA) has reinstated three arbitrators that it previously fired after making an adverse ruling against Merrill Lynch in 2011.

FINRA’s removal of the arbitrators raised questions among lawyers and other observers who openly questioned whether a major wire house firm like Merrill Lynch could exert enough political pressure to have arbitrators removed from future pools if they made a ruling that was adverse to the firm’s interests. This perception apparently lead to the regulator’s change of heart and the arbitrators’ subsequent reinstatement.

According to Linda Fineberg, the SRO head, “FINRA simply does not remove arbitrators from the roster based on their (rulings) and never has.” This statement appeared in a letter Fienberg wrote to the President of the Public Investors Arbitration Bar Association (PIABA). The letter went on to say “FINRA’s initial decision to remove the arbitrators was made based on “the findings of an experienced senior staff member who had initially reviewed the hearing record.”

The controversy concerning the arbitrators’ dismissal erupted following the publication of a previous Bloomberg article on July 8. 2012

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