Who Are The FINRA Securities Arbitrators?

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.

picture of New York Stock ExchangeThe 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.

in October 2008, the Financial Industry Regulatory Authority (FINRA) launched a pilot program to gauge the interest investors might have in arbitrating their claims before a panel composed solely of public arbitrators, instead of two public arbitrators and one arbitrator from within the financial industry, as was normally the case.

blind justice peekingData from the pilot program show that all-public panels awarded investors damages in 65 percent of the cases that resulted in awards, as opposed to 49 percent of the non-pilot program cases in 2009 and 48 percent of the non-pilot program cases in 2010.

To be eligible, an investor’s case had to involve one of 14 brokerage firms that had volunteered to enter to a set number of investor cases in the program. The cases did not involve individual brokers. Among investors who had eligible cases, 54 percent opted in.

FINRA All-Public Arbitrator Option Approved By SEC

In October 2010, FINRA proposed a rule to make the all-public arbitrator option permanent, and it was approved by the Securities and Exchange Commission (SEC) in February 2011. The rule applies to all investor disputes against any firm and any individual broker, but does not apply to arbitration disputes involving only industry parties. The pilot program ended when SEC approved the rule.

Richard Ketchum, FINRA chairman and CEO said at the time that giving investors the option to have an all-public panel would increase public confidence in the fairness of FINRA’s dispute resolution process.

Pilot Program Results Summary

FINRA has now released a summary of the results of the pilot program that led to the new rule, one year after the program closed to new cases. FINRA cautioned, however, that 12 percent of the cases that entered the program are still pending, so that some of the results are incomplete.

To return to data on damages, the summary shows that in the pilot program cases — whether the panels comprised all-public arbitrators or just a majority of public arbitrators — investors were given damages more often than they were in awards issued by majority public panels in non-pilot program cases. FINRA stated in its summary that the data is not sufficient to draw meaningful conclusions about these awards

Of the 49 awards issued by all-public panels in the pilot program, investors were awarded damages in 26 of 40 cases, or 65 percent.

financial industry regulatory authorityIn the remaining nine cases, the parties settled and the all-public panels awarded expungement or other relief.

Among the pilot program awards, 23 were issued by panels comprising two public arbitrators and one non-public arbitrator. These panels awarded damages to investors in eight of the 13 cases, or 62 percent. The remaining 10 cases settled.

To compare, panels of three arbitrators awarded damages to investors in 49 percent of non-pilot program cases. In 2010, arbitrators awarded damages in 48 percent of these cases.

The numbers show that 51 percent of the investors who chose to participate in the program opted for a panel composed solely of public arbitrators.

Not every investor eligible for the pilot program participated, however. FINRA noted that if eligible investors who declined to participate were included in the numbers, then actually only 27 percent of eligible investors chose an all-public panel. Eligible investors who declined would be certain to have at least one arbitrator from within the financial industry seated on their panels.

The numbers are not all cut and dry when it comes to public versus industry arbitrators, however. Although panels generally have three arbitrators, the parties are given a list of 10 arbitrators to rank in order of preference, resulting in the followings statistics:

In 289 cases investors named all public arbitrators as their possible choices for the panel.

In 50 cases investors named a single non-public arbitrator as a possible choice for the panel.

In 44 cases investors named two non-public arbitrators.

In 19 cases named three non-public arbitrators.

In 106 cases investors named four non-public arbitrators.

In 33 cases investors named five non-public arbitrators.

In 19 cases investors named six non-public arbitrators.

In 7 cases investors named seven non-public arbitrators.

In 3 cases investors named eight or more non-public arbitrators as possible choices for the panel.

To put it another way, investors in 29 percent of the pilot cases chose four or more non-public arbitrators as possible panelists.

Not surprisingly, broker-dealer firms made much different choices. In 96 percent of the cases, firms chose four or more non-public arbitrators to possible sit on the panel.

Pilot Program Cases Compared to Non-Pilot Cases

FINRA also examined differences in the disposition of pilot program cases as compared to non-pilot program cases.

Cases in the pilot program that had all public arbitrators settled 84 percent of the time. The result was an award in 13 percent of the cases, and the case was withdrawn 3 percent of the time.

Cases in the pilot program with panels made up of a majority of public arbitrators settled 86 percent of the time. The result was an award in eight percent of the cases, and the case was withdrawn 6 percent of the time.

Perhaps the most surprising result was the number of awards bestowed by arbitration panels that were not a part of the pilot program. Among all investors’ cases that were decided by a three-member arbitration panel, 71 percent of them settled, but 19 percent resulted in an award, which is 6 percent higher than the figure for all-public panels in the pilot program. Of course as shown by the statistics above, awards do not necessarily include damages.

Eight percent of the non-pilot program cases were withdrawn, and 2 percent had some other outcome, labeled by FINRA as miscellaneous.

As far as turnaround time is concerned, there wasn’t much of a difference. The non-pilot program cases closed in 14.6 months. Cases in the pilot program with an all-public panel closed in 15.8 months, and cases in the pilot program with a majority public panel closed in 13.5 months.

Finally, there was no appreciable difference among cases in the use of expert witnesses.

Guiliano Law Group

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.

 

OUR PRACTICE AREAS

FINRA Arbitration

The litigation of individual and group investor claims against securities broker-dealers and investment professionals adjuducated in arbitration before the Financial Industry Regulatory Authority.

Defective Financial Products

Alternative Investments, Promissory Notes, Structured Products, High Yield Bond Funds, Non-Marketable Real Estate Investment Trusts, Inverse and Leveraged ETFs,  the Failure to Conduct Due Diligence.

Unsuitable Investments

Speculative or High Risk Investment Recommendations, Unsuitable Investment Strategies, Low Priced Securities, Customer Specific Unsuitability, Inappropriate Investment Recommendations.

Stockbroker Misconduct

Breach of Fiduciary Duty, Churing, Unauthorized Trading, Fraud, Stockbroker Theft, Ponzi Schemes, the Sale of Unapprovied investments.

"First Name I Would Mention"
    

I had questions and sought a consultation regarding what I believed to have been inappropriate treatment by my brokerage firm. He took the time to give me a clear understanding of what was involved and clearly described next steps to resolve the matter. He did this in a concise, complete and friendly manner. Although in the scheme of things my matter was small. From what I have seen, if I ever had need of a securities lawyer or was asked to refer one to a friend, Nicholas would undoubtedly be the first name I would mention.

Keith (Avvo)
"Upstanding"
    

I had a problem with a dishonorable Financial Adviser! So I contacted Mr. Guiliano to see what I could do. Nick said I can't very well charge you for something you can do on your own! Then proceeded to tell me what to do. Because of the short amount of time and my untrustworthy financial adviser's not crossing tee's and dotting I's my life's savings is in the process of being transferred into 3 separate accounts. One's that will work best for me. Instead of one account that kept my money out of my reach! You will have a hard time finding a more upstanding Attorney then Mr. Guiliano!

Walter (Avvo)
"Successful in Achieving Results"
    

I was the one who contacted Nick through his website as my ex-wife had little or no knowledge of investments, and depended completely on the advice of the investment firm. Without specifics I can say that Nick (and his wife) were not only successful in achieving results in the case, but in the process were all that one could expect (and more) as shown in my overall ratings above. I would highly recommend him.

Joe S. (Avvo)
Excellent Attorney!

Nick represented my wife and I in a recent lawsuit. He was the best attorney we have ever used! Communication was great, he kept us updated regularly, he explained everything in great detail, gave us all our options, and most importantly we always felt he represented our best interest throughout the entire process. We would highly recommend Nick!

Brian F. (Avvo)

"One In A Million"
    

Nicholas is extremely knowledgeable regarding many facets of the sometimes complicated securities business. This comes from his first hand experience in the business prior to his decision to practice law. Nick is also very dedicated to staying abreast of the ever changing environment that is so prevalent in the investment world. Combine that with his drive and determination to get things done and you have one in a million!!!

Anthony S. (Avvo)
"Very Good To Work With"
    

My case was taken on a contingency basis. Even though it lasted about two years, the Guiliano law firm kept in contact with me, continued to research the case and brought it to a successful conclusion. They were very supportive of me in my first such experience and were very good to work with.

"Man Of Integrity"
    

Nick is an incredibly decent Atty. He's a man of integrity, fairness, and honesty. You could see that it's wasn't just me who noticed, it was opposing counsel, at the end of the Zoom! I'm completely impressed with Nick and will keep him in my prayers. Thanks again!

"Fights for his clients like a bull dog"
    

I contacted Nicholas Guiliano for my 90 year old mother, who lives in Oregon to assist her in recovering from an unscrupulous financial manager who talked her into investing in some very high risk and speculative securities to reap high commissions. Mr Guiliano worked very hard to recover what he could for my mother. He is the best and fights for his clients like a bull dog to uphold their rights and protect their interests. I highly recommend Mr Guiliano and his firm when it comes to securities issues.

"Finest Litigation Attorneys"
    

I have been a Corporate Counsel for over 30 years having worked with Banks and large public companies. Nick is one of the finest litigation attorneys in the country.

Anthony P. (Google Business)
"Best Of The Best"
    

I have employed Nick Guiliano personally and on behalf of my clients in the past. Nick is absolutely the best securities lawyer in Philly if not the country. The best of the Best!

"Awesome Results"
    

I would like to take this opportunity to express my sincere congratulations for your awesome results. I want to acknowledge my appreciation and respect for their splendid professionalism and knowledge you have shown in handling the laws (previous and present), for arbitration over fraud litigations.

"More than most lawyers"
    

Mr. Guiliano is highly accomplished securities lawyer. He helped us secure a wonderful result in case where my husband and I lost almost all our lifesavings. He is also high compassionate, and did more than most lawyers have ever done for us, as he seems that he cares.

Mary S. (Avvo)
"Somebody you want on your side"
    

Personable and professional, he is the one to go to when investors are defrauded by Brokerage houses and Investment banks. Somebody you want on your side when things go wrong. He takes personal interest in every case and tries his best. Although I could not recover all my losses due to Fed/SEC action which was beyond his control, I would give Mr. Guiliano full marks on every count. He even worked with my accountants to help me write off losses due to fraud.

Ashok N. (Avvo)
"Superb Representation"
    

Mr. Guiliano (Nicholas) represented my mother and I in an investment case where it appeared the agent was preying on elderly people and steering them to improper investments to reap commissions. Mr Guilano did an excellent job of preparing the case and representing us. Although the case settled out of court, it was the best outcome expected for several technical reasons out of his control. He always kept us informed and provided sound recommendations. I would not hesitate to recommend Mr. Guiliano for any investment related case.

Bob W. (Avvo)
"Recommend Him Strongly"
    

I used Mr. Guiliano for a investment fraud case and he did a very good job. I got a good deal of my money back that had been lost due to risky investments I was put into by a prominent company. It was not a really big case, yet Mr. Guiliano was interested and responsive and kept on top of things for me. I would recommend him strongly.

Anne H. (Avvo)
"His Ability And Advice Paid Off"
    

We called Mr. Guiliano after reading his article in Forbes magazine. Although we though the statue of limitations might have run out on our case, we were thrilled when he took our case. Against the odds, he was able to get a settlement for us. He kept us informed and advised us on the proper course of action. We always felt confident with his ability and advice and it paid off. Highly recommend.

Cris (Avvo)
"Ability To Think Outside The Box"
    

Nick Guiliano came highly recommended to me and I was very fortunate that he agreed to take my case. His knowledge of the law and his ability to think outside the box amazed me more and more as my case progressed. His aggressive style and total dedication to me and my case gave me the confidence that we were going to prevail and we did. He is one of the few Attorneys that does not finish his work at end of the day. He was always thinking of ways to use his expertise and knowledge on my behalf. On a personal note, he is a very down to earth guy who makes you very comfortable and at ease. He gave me the ability to sleep at night knowing that my case was in his hands. I will always recommend him without any reservations. In my book he is “the Best”

Jerry V. (Avvo)
"Successful in Winning"
    

Nicholas Guiliano was successful in winning a case against one of the firms where I had invested. I had a safe investment until a young eager stock broker took over my account and slowly kept putting my money in risky stocks, all while I was on disability. Nick was able to get me a portion of my money back within 2 months. He always was available to speak, and very courteous. I am so grateful to have found Nick. Thank you Nick!
Jill I. (Avvo)

"Absolutely Fantastic"
    

Nick represented me when a stock broker took advantage of the money I had in my portfolio. He did an unbelievable job because most people thought I did not have a leg to stand on. He really knows his field. I am really thankful that I met Nick because he did a phenomenal job. I would highly recommend him.

Theresa S.
"Dependable and Accessible"
    

Philadelphia has lived up to it's reputation as having the best attorneys in the Country. I had been told I had a problem of having a Hedge Fund investment. He went to a lot of time and trouble to not take my case. What I really appreciate is his work ethic. He was very kind to me not only with the generosity of his time, but with his words of support. No civilian, like myself, wants a lawsuit but if I ever needed one, it is Mr, Guiliano who I would call upon to represent me. He is a good man.

Kathleen (Avvo)
"Incredibly Resourceful"
    

Nick was incredibly resourceful and professional. His understanding of securities and investment fraud is unparalleled. He is indeed connected with all the powers to be , and is able to provide intellectual and cogent insights. He is tenacious in fighting for his clients, and will never relent. I was able to follow his recommendations and am glad I did.

Mark C. (Avvo)
"We are so very grateful"
    

My husband and I were lucky to find Nick after losing a substantial amount of money due to poor investing from a prominent company. He made us feel at ease right away and was always accessible for questions and concerns. Nick and his team were wonderful with gathering up all the pertinent information needed for our case, constantly in contact with us, answering all of our questions, which helped to make the process a lot less stressful. We are so very grateful to have had The Guiliano Law Firm represent us and the fact that they did it on a contingency basis made it possible to follow through. If not for them, we would never have been able to pursue this, financially or emotionally.

Stacey B. (Avvo)

REQUEST A FREE CONSULTATION

Fill out the form below to recieve a free and confidential intial consultation.