Securities Law Prof Blog

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

Tuesday, February 1, 2011

SEC Approves FINRA Rule Allowing Customers the Option of All-Public Panel

The SEC approved FINRA's proposed rule change to provide customers in all FINRA arbitrations the option of having an all public panel. Historically, in cases with three arbitrators, the panels have been comprised of two public arbitrators and one arbitrator with a nexus to the securities industry. The amended rules will apply to all customer cases in which a list of potential arbitrators has not yet been sent to the parties. 

FINRA sought the SEC's approval for the rule change in October after results of a 27-month pilot program showed that investors presented with this option chose the new method of arbitrator selection nearly 60 percent of the time. Participation in FINRA's Public Arbitrator Pilot Program was voluntary and ultimately included the participation of 14 firms.

Here is NASAA's statement on the approval:

“State securities regulators have long advocated providing investors with greater choice in FINRA arbitrations. Providing investors with the option to have an all-public panel of arbitrators is a positive development toward increasing the fairness of the securities arbitration process. Another step in enhancing investor confidence would be to allow investors to choose between arbitration and litigation in an independent judicial forum.”

Other Regulatory Action, SEC Action, Securities Arbitration | Permalink

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