Securities Law Prof Blog

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

Saturday, April 13, 2013

FINRA Board Scheduled to Consider Changes to Customer Arbitration Rules

At its April 18 meeting the FINRA board of governors will consider a proposed rule change to the Customer Code of Arbitration, to make it easier for customers to select a panel consisting of all public arbitrators (in claims over $100,000).  Currently, the default option is a panel consisting of two public and one industry arbitrator, and a customer must make an election to select an all-public panel option.  The proposed rule change, as described on the FINRA website:

The Board will consider proposed amendments to FINRA Rule 12403 (Cases with Three Arbitrators) to simplify the arbitration panel selection rules. Rather than requiring the customer to elect a panel-selection method, parties in all customer cases with three arbitrators would get the same selection method. All parties would see lists of 10 chair-qualified public arbitrators, 10 public arbitrators and 10 non-public arbitrators. The proposed rules permit four strikes on each of the public arbitrator lists. However, any party could select an all-public arbitration panel by striking all of the arbitrators on the non-public list.

When FINRA first proposed giving customers the option of selecting an all-public panel, I applauded the concept, but worried that pro se claimants might lose the option inadvertently by failing to make the election within the prescribed time period.  I suggested that the default should be an all-public option and that customers could elect to include one industry arbitrator.  FINRA was not receptive to my suggestion.

Since adoption of the all-public option, FINRA has stated that customers are electing for an all-public panel more frequently than it had anticipated, so this proposal may be in response to that.  In any event, it is a welcome development, and I hope that the Board of Governors will view the proposal favorably.

The board of governors will also consider amendments to the Discovery Guide relating to e-discovery, described as follows:

The Board will consider proposed amendments to the Discovery Guide used in customer arbitration proceedings to provide general guidance on e-discovery issues and product cases. The guidance, which would appear in the introduction to the Discovery Guide, would emphasize flexibility in the discovery process. FINRA is not proposing to amend the Document Production Lists, which specify documents that are presumptively discoverable in customer cases. The proposed amendments would also clarify existing provisions in the introduction relating to affirmations.

Other Regulatory Action, Securities Arbitration | Permalink

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