The Financial Industry Regulatory Authority says it wants investors with securities claims against broker-dealers to have the right to an arbitration panel that doesn’t include industry representatives. FINRA will file its proposal with the Securities and Exchange Commission for approval.
Under the new rule, investors would have the option of choosing between a panel comprised of one industry arbitrator and two public arbitrators and a panel made up of three public arbitrators. FINRA is hoping this will create a greater perception of fairness in the mandatory arbitration system, which it oversees.
During the last two years, FINRA has run a pilot program that gave investors the option between the two types of panels. The program was created to test whether all-public panels gave investors a fairer shake in their disputes with broker-dealers. 14 investment firms took part in the program. According to FINRA, investors chose to have their securities case heard by an all-public panel 60% of the time. 50% of the time they chose the panel that included one industry member. The pilot has been extended for another year. As of September 28, nearly 560 cases have been part of this program.
Now that the Dodd-Frank Wall Street Reform and Consumer Protection Act has been enacted, the SEC can limit or ban mandatory arbitration clauses, which can be found in contracts between broker-dealers and their clients. Investor advocates are hoping for this.
Related Web Resources:
Finra asks SEC to OK all-public panels for arbitration disputes, Investment News, September 28, 2010
FINRA Proposes to Permanently Give Investors the Option of All-Public Arbitration Panels, September 28, 2010
Number of FINRA Arbitration Claims Rose in 2009 Following Market Crisis, Stockbroker Fraud Blog, January 13, 2010
Our securities fraud law firm represents clients with arbitration and litigation cases against broker-dealers and others. Over the years, we have helped many individual and institutional investors recover their losses.