In arbitration, however, instead of presenting their case to a judge and a jury, investors present their case to a Panel of arbitrators. Approximately 30 days after Respondent files its Answer, the parties receive a “randomly” selected list of arbitrators. The parties select their arbitrator choices these lists based on Arbitrator disclosure information provided by FINRA. According to the Code of Arbitration Procedure, each separately represented party may strike up to four of the arbitrators from each list for any reason.

Eligible Arbitrators

These arbitrators, in FINRA securities arbitrations, have undergone certain training to be eligible arbitrators. Arbitrators are typically lawyers, business persons, accountants, former judges, and others. In connection with the arbitration process, the parties are provided a list of typically thirty (30) arbitrators, together with a summary of their educational and occupational background and prior awards that they have rendered.

Public Arbitrators

On July 24, 2008, FINRA announced a voluntary two-year Public Arbitrator Pilot Program (Pilot Program), which allows investors in three-arbitrator cases naming only a participating firm to have a panel consisting of three public arbitrators, instead of two public arbitrators and one non-public arbitrator.

On February 1, 2011, customers in FINRA securities arbitrations were given the option to choose an all public arbitration panel in all cases with three arbitrators. As of December 2014, FINRA’s national roster of qualified arbitrations includes 3,527 public arbitrators and 2,834 non-public or securities industry related arbitrators.

Code of Arbitration Procedure

Under the FINRA Code of Arbitration Procedure, before appointing arbitrators to a panel, the Director of FINRA Securities Arbitration will notify the arbitrators of the nature of the dispute and the identity of the parties. Each potential arbitrator must make a reasonable effort to learn of, and must disclose to the Director, any circumstances which might preclude the arbitrator from rendering an objective and impartial determination in the proceeding, including: (1) Any direct or indirect financial or personal interest in the outcome of the arbitration; (2) Any existing or past financial, business, professional, family, social, or other relationships or circumstances with any party, any party’s representative, or anyone who the arbitrator is told may be a witness in the proceeding, that are likely to affect impartiality or might reasonably create an appearance of partiality or bias; (3) Any such relationship or circumstances involving members of the arbitrator’s family or the arbitrator’s current employers, partners, or business associates; and (4) Any existing or past service as a mediator for any of the parties in the case for which the arbitrator has been selected.

The Arbitrator’s Manual, specifically provides that:
“[t]he arbitrators should avoid even the appearance of impropriety.”

But when FINRA makes a mistake, and frequently mis-classifies an arbitrator with industry ties as a public arbitrator, or FINRA chooses not to disclose information that the arbitrator does disclose to FINRA, at least according to the United States Court of Appeals for the Third Circuit, in its affirmation of the District Court’s decision in Lawrence Stone v. Bear Stearns & Co., Inc., Case 2:11-cv-05118-LDD, it is the investor’s fault.

Initial Pre-Hearing Conference

After the arbitrators are appointed by FINRA, based upon the respective selections or rankings of the arbitrators by the parties, an Initial Pre-Hearing Conference is conducted by the Panel, by telephone with counsel for the respective parties, where final hearing dates and other important dates, including the dates to file motions, or other matters, are scheduled.

Arbitration Panel

Once the arbitrators are appointed to a Panel, the arbitrators can only be removed for cause of the failure to disclose any conflicts as set forth above.

Within approximately 30 days from the last final hearing session, the Arbitration Panel renders an Award.

Guiliano Law Firm

Our practice is limited to the representation of investors. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you. There is never any charge for a consultation or an evaluation of your claim. For more information, contact us at (877) SEC-ATTY.

For more information concerning common claims against stockbrokers and investment professionals, please visit us at stockbrokerfraud.com.