Securities Law Prof Blog

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

Friday, May 4, 2012

FINRA's Simplified Arbitration Cap Raised to $50,000

The SEC approved a proposed rule change filed by FINRA to amend FINRA’s Customer and Industry Codes of Arbitration Procedure to raise the limit for simplified arbitration from $25,000 to $50,000. (Download 34-66913[1])

FINRA currently offers streamlined arbitration procedures for claimants seeking damages of $25,000 or less. Under FINRA’s simplified arbitration rules, one chair-qualified arbitrator decides the claim and issues an award based on the written submissions of the parties, unless the customer requests a hearing (if it is a customer case), or the claimant requests a hearing (if it is an industry case). FINRA also expedites discovery in these cases.

The rule change raises the dollar limit for damages sought in order to offer simplified arbitration to claimants seeking damages of $50,000 or less. The rule change also states that if the amount of a claim is more than $50,000, but not more than $100,000, exclusive of interest and expenses, the panel would consist of one arbitrator unless the parties agree in writing to three arbitrators.

FINRA represented that the $25,000 threshold captured twenty-one percent of all cases filed with FINRA’s arbitration forum in 1998, but currently captures only ten percent of FINRA’s caseload. FINRA stated that, based on 2011 statistics, raising the threshold to $50,000 would increase the percentage of claims administered under simplified
arbitration to seventeen percent of the claims filed with the forum.

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