Posted On: February 12, 2011

SEC Approves FINRA’s Proposal to Give Investors an All-Public Arbitration Panel Option

The Securities and Exchange Commission has approved the Financial Industry Regulatory Authority's proposal to give investors the choice of having their securities claims against broker-dealers heard by an arbitration panel that doesn’t include any industry members. FINRA says that its Rule 12403, which lets investors choose between a majority-public panel and all-public panel, will go into effect right away. Arbitration cases that began prior to the SEC’s decision to approve the proposal will be notified of this new rule.

Prior to submitting its proposal to the SEC, FINRA tested the idea as a pilot program for more than two years. FINRA says that while investors regularly chose to have nonpublic arbitrators hear their securities case, it became clear that giving them other options improved their perception that the arbitration process was a fair one.

State securities regulators are praising the SEC’s decision. However, they are calling for even more reform.

Optional All Public Panel Rule 12403(d):
FINRA will send the parties three lists. One list will contain the name of 10 non-public arbitrators. The other list will name 10 chair-qualified public arbitrators. The other list will name 10 public arbitrators. Each party will be able to strike up to four arbitrators from the public and chair-qualified lists. Parties can strike the names of all 10 arbitrators from the non-public arbitrator list.

Majority Public Panel Rule 12403(c):
This panel will include one non-public arbitrator, one public arbitrator, and one chair-qualified public arbitrator. The same three lists as the ones mentioned for the All Public Panel will be sent to the parties. Up to four arbitrators from each list can be struck.



Related Web Resources:

Notice to Parties – New Optional All Public Panel Rules, FINRA

SEC Approves FINRA Proposal to Give Investors Permanent Option of All Public Arbitration Panels, FINRA, February 1, 2011

Related Blog Posts:
FINRA Wants to Make All-Public Arbitration Panel for Investors Permanent, Stockbroker Fraud Blog, October 7, 2010

Number of FINRA Arbitration Claims Rose in 2009 Following Market Crisis, Stockbroker Fraud Blog, January 13, 2010

FINRA Says Number of Stockbroker Fraud Arbitration Claims by Plaintiffs is Rising, Stockbroker Fraud Blog, July 14, 2009

Shepherd Smith Edwards & Kantas LTD LLP represents clients with both securities arbitration claims and securities fraud complaints against broker-dealers, investment advisers, brokers, and other financial industry members. Contact our stockbroker fraud law firm today.