Securities Law Prof Blog

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

Friday, February 24, 2012

FINRA Proposes Raising Limit for Simplified Arbitration from $25,000 to $50,000

FINRA has filed with the SEC a proposed rule change to amend FINRA Arbitration Rules to raise the limit for simplified arbitration from $25,000 to $50,000. In its release FINRA explains that it currently offers streamlined arbitration procedures for claimants seeking damages of $25,000 or less. Under the simplified arbitration rules, one chair-qualified arbitrator decides a claim and issues an award based on the written submissions of the parties, unless, in a customer case, the customer requests a hearing, or, in an industry case, the claimant requests a hearing. FINRA also streamlines discovery for these cases.

The $25,000 threshold has been in place since 19983 and, at that time, captured 21 percent of all cases filed with the forum. Currently, the $25,000 threshold captures ten percent of FINRA’s caseload. Statistics for 2011 indicate that raising the threshold to $50,000 would increase the percentage of claims administered under simplified arbitration to 17 percent of the claims filed with the forum.

FINRA states a number of advantages to raising the threshold for simplified arbitration to $50,000:

Forum fees for simplified arbitration claims would be reduced.

Parties would save the time and expense of preparing for, scheduling, and traveling to the hearing.

Customers who are not able to retain an attorney to handle their case because of the small amount in dispute, and who are not comfortable appearing at an evidentiary hearing without representation, would have the flexibility to choose whether to request a hearing.

Raising the limit for cases decided on the papers would reduce the time to process the cases because the arbitrator and parties would not need to coordinate their calendars to schedule a hearing.

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