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

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Tuesday, June 18, 2013

FINRA Files Proposed Rule Change to Simplify Selection of All-Public Arbitrator Panel in Customer Disputes

FINRA has filed with the SEC a proposed rule change to amend FINRA Rule 12403 of the Code of Arbitration Procedure for Customer Disputes (“Customer Code”) to make it easier for parties to select an all-public arbitrator panel in cases with three arbitrators. Comments are due 45 days after publication in the Federal Register.

Under the proposed rule change, FINRA would no longer require a customer to elect a panel selection method.  Instead, parties in all customer cases with three arbitrators would get the same selection method. FINRA would provide all parties with lists of ten chair-qualified public arbitrators, ten public arbitrators, and ten non-public arbitrators. FINRA would permit the parties to strike four arbitrators on the chair-qualified public list and four arbitrators on the public list. However, any party could select an all-public arbitration panel by striking all of the arbitrators on the nonpublic list. (Rel. 34-69762)

In its accompanying Release, FINRA gives statistics since implementation of the All Public Panel Option:

[C]ustomers in approximately three-quarters of eligible cases have chosen the All Public Panel Option. Customers using the Majority Public Panel Option have done so by default 77 percent of the time,
rather than by making an affirmative choice (i.e., these customers did not make an
election in their statement of claim or accompanying documentation, and did not respond
to the follow-up letter FINRA sent).

As of March 31, 2013, customers selecting the All Public Panel Option have chosen to strike all of the non-public arbitrators in 66 percent of the cases during the ranking process. Customers have ranked one or more non-public arbitrators in 34 percent of cases and four or more in 13 percent of cases proceeding under the All Public Panel Option. Industry parties have ranked one or more non-public arbitrators in 97 percent of cases and have ranked four or more non-public arbitrators in 90 percent of cases.

FINRA has been tracking the results of arbitration awards decided by all public panels and majority public panels since implementation of the rule change. For the period February 1, 2011 through March 31, 2013, investors prevailed 49 percent of the time in cases decided by all public panels and 34 percent of the time in cases decided by majority public panels.

http://lawprofessors.typepad.com/securities/2013/06/finra-files-proposed-rule-change-to-simplify-selection-of-all-public-arbitrator-panel-in-customer-di.html

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