Friday, May 21, 2010
The SEC posted on its website FINRA's proposed rule change, to amend Rules 12403 and 12404 of the Code of Arbitration Procedure for Customer Disputes (“Customer Code”) and Rules 13403 and 13404 of the Code of Arbitration Procedure for Industry Disputes (“Industry Code”) to increase the number of arbitrators on each list generated by the Neutral List Selection System (“NLSS”). A complaint of the FINRA arbitration selection process has been that after the parties exercise their right to strike names, there are no arbitrators left on the list, and FINRA must select arbitrators that were not on the parties' list. FINRA explains that the amendment would expand the number of arbitrators on each list (public, non-public, and public chairperson) generated through NLSS from eight arbitrators to 10 arbitrators. Thus, in every two party case, at least two arbitrators would remain on each list after strikes. The additional number of arbitrators will increase the likelihood that the parties will get panelists they chose and ranked, even when FINRA must appoint a replacement arbitrator.