Securities Law Prof Blog

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

Tuesday, December 14, 2010

FINRA Releases Updated Information on Pilot Program Results

FINRA recently posted at its website an update on the results of its Pilot Program that allows eligible customers that have instituted arbitration proceedings against 14 firms to opt for an all-public arbitrator panel.  On Oct. 26, FINRA filed a rule proposal with the SEC that would allow all investors the option of an all-public panel.  The proposed rule would apply to all investor disputes against any firm and any individual broker.  FINRA reports that:

As of December 1, 2010, fifty-six percent of investors eligible to participate have opted in, resulting in 583 out of 1,035 cases that were eligible for the Pilot Program. Investors have chosen to rank one or more non-public arbitrators on the list in 50 percent of the cases (255 of the 506 cases) in which parties have completed the ranking process.

From the above, FINRA concludes that in 74 percent of cases eligible for the Pilot Program, investors have opted for a non-public arbitrator either by choosing not to participate in the Pilot Program or by participating in the pilot but ranking one or more non-public arbitrators.

FINRA also reports that:

Parties involved in Pilot Program cases have resolved cases via settlement more often than non-Pilot Program cases involving three arbitrators. Fewer Pilot Program cases result in awards than non-Pilot Program cases with three arbitrators.

Preliminary award outcomes show that all-public panels in Pilot Program cases award damages to investors more often compared to awards issued by majority public panels in Pilot Program and non-Pilot Program cases; however, there is not yet sufficient award data to draw meaningful conclusions.

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