FINRA Proposes Changes To Arbitration Selection Process

Posted on January 12th, 2023 at 3:38 PM
FINRA Proposes Changes To Arbitration Selection Process

From the Desk of Jim Eccleston at Eccleston Law.

The Financial Industry Regulatory Authority (FINRA) has proposed rule changes to “enhance the transparency of the arbitrator selection” and other alterations aimed to improving its dispute resolution services.

FINRA currently is seeking approval from the Securities and Exchange Commission (SEC) prior to enforcing the rule changes. Following an investigation, which concluded that there was no evidence that there was manipulation in the arbitrator selection process, FINRA determined that it would provide “greater clarity” regarding its arbitration processes. Under the new rule proposal, FINRA would codify its current practice of utilizing both an algorithm and “conducting a manual review for conflicts of interest prior to sending an arbitrator list” to disputing parties, according to the filing.

The new rule proposal additionally requires for a FINRA director to “provide a written explanation” to parties about any decision to grant or deny arbitrator removal requests. The proposal with further require FINRA to “clarify for forum users that parties may challenge an arbitrator for cause at any point after receipt of the arbitrator lists until the first hearing session begins”, according to the filing. FINRA’s proposed rule changes would additionally permit videoconferencing as an alternative for prehearing conferences and for disputes involving $50,000 or less.

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.

Tags: eccleston, eccleston law, advisors, law, finra

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