FINRA Is Pressured to Cut Ties Between Public Arbitrators and the Industry

Industry arbitration critics want the Financial Industry Regulator Authority to forbid “public” arbitrators from having any connections to the industry. Although the majority of arbitration panels in the industry continue to be made up of one industry member and two “public” panelists, critics say that the public members are not actually public-especially if the arbitrator has any industry ties.

Investor attorneys want FINRA to adopt a “zero tolerance” policy toward any public arbitrators that have a connection to the industry.

Public arbitrators currently can have up to 10% of their yearly income from the last two years come from clients that participate in activities related to the securities industry.

FINRA has suggested limiting the revenue amount that a public arbitrator can earn from brokerage firms for overseeing disputes to $50,000. This proposed rule awaits approval from the SEC. The purpose of the rule is to allow defense attorneys that don’t work a lot in the industry to keep serving as “public” panelists.

Plaintiff’s attorneys have praised the $50,000 proposed limit but say that to call someone a “public” arbitrator that is “neutral” when he or she has industry connections is misleading. State regulators are in agreement and have called for FINRA to remove any semblance of bias from the arbitration forum.

The SEC is considering all feedback and will very likely not rule on FINRA’s proposal until later this year.

Whether you choose to pursue your investment losses through litigation or arbitration, it is important that you retain the services of an experienced securities litigation law firm so that you can maximize the results and obtain the most successfully outcome possible for your case.

At Shepherd Smith and Edwards, we are one of the law firms on record that advocates the zero tolerance policy of no ties between the industry and public arbitrators. We have successfully represented thousands of investors in arbitration and in federal and state courts. We are committed to helping our clients recoup their investment losses caused by the negligence or wrongful actions of members of the securities industry.

Contact Shepherd Smith and Edwards today and ask for your free consultation with one of our securities litigation attorneys.

Related Web Resources:

FINRA urged to cut industry ties for arbitrators, Investment News, September 4, 2007

U.S. Securities and Exchange Commission