Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, June 15, 2009

PIABA Submits Petition to SEC to Eliminate Requirement of Industry Arbitrator in Customer Disputes

The Public Investors Arbitration Bar Association ("PIABA") submitted to the SEC, pursuant to SEC Rule of Practice 192A, a rule change petition to eliminate the requirement that an arbitrator affiliated with the securities industry sit on all customer cases in which the amount in controversy exceeds $100,000 which are arbitrated before the Financial Industry Regulatory Authority ("FINRA"). PIABA proposes that investors and industry parties be given the choice to decline to have an industry arbitrator sit on panels that hear and decide their cases.  PIABA believes that FINRA Dispute Resolution (FINRA-DR) Code of Arbitration Rule 12402, mandating one industry arbitrator on all three person panels in arbitration actions between customers and industry members, unfairly and systemically shifts the balance of justice against customers and that requiring customers who believe they have been wronged by the securities industry to have claims decided by panels that must include a representative of that securities industry creates at the least the appearance of bias, if not outright bias. 

(thanks to Jill Gross for calling this to my attention)

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There is too much at stake these days in customer arbitration, and the concept of allowing customers to opt out of having an industry arbitrator is a good idea. We should let all sides opt out of the requirement, as well as allowing them to remove customer attorneys from the Panel. In fact, let's make the same changes for all employee disputes with firms as well.

Arbitrations need to not only be fair, which in my view they are, but they also need to appear to be fair.

My take on this is at

Posted by: Mark Astarita | Jun 16, 2009 6:36:56 AM

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