Wednesday, December 7, 2011
FINRA has filed with the SEC a proposed rule change (Release No. 34-65896; File No. SR-FINRA-2011-067) (December 6, 2011) to amend FINRA Rule 13201 of the Code of Arbitration Procedure
for Industry Disputes (“Industry Code”) to align the rule with statutes that invalidate predispute
arbitration agreements for whistleblower claims.
The Dodd-Frank Act amended the Sarbanes-Oxley Act of 2002 by adding a new paragraph (e) to 18 U.S.C. § 1514A4 to provide that:
(1) WAIVER OF RIGHTS AND REMEDIES – The rights and remedies provided for
in this section may not be waived by any agreement, policy form, or condition
of employment, including by a predispute arbitration agreement.
(2) PREDISPUTE ARBITRATION AGREEMENTS – No predispute arbitration
agreement shall be valid or enforceable, if the agreement requires arbitration
of a dispute arising under this section.
Prior to the Dodd-Frank Act, it was FINRA staff’s position that parties were required to arbitrate SOX whistleblower claims under the Industry Code. The proposed rule change would amend FINRA Rule 13201 of the Industry Code to make clear that parties are not required to arbitrate SOX whistleblower claims, superseding the existing guidance to the contrary. While the main impetus for the proposed rule change is the need to update FINRA staff’s stated position on SOX whistleblower claims, FINRA proposes to make the rule text broad enough to cover any statutes that prohibit predispute arbitration agreements for whistleblower claims.