In 1817, probably under the old Oak Tree in Trinity square, The New York Stock Exchange (NYSE) first introduced arbitration to the securities industry to resolve disputes among its members, however, 154 years ago, in 1872, the became the first securities exchange to offer arbitration for customer disputes against members, and in 1869 it amended its constitution to require “members” to submit to arbitration if requested by a non-member or customer. (In fact, legally, a “customer” is everyone who is not a “member”).
Submit or be eaten. Most people do not know that Financial Industry Regulatory Authority or FINRA is a private, not-for-profit organization with approximately $1.7 billion in net assets as of December 31, 2025. In 2024, FINRA reported a net income of $99.6 million.
The New York Stock Exchange (NYSE) first introduced arbitration to the securities industry in 1817 to resolve disputes among its members. This internal mechanism was later expanded in 1872* to allow customers to arbitrate disputes with members, establishing an early, informal alternative to court litigation.
Key historical points regarding the first NYSE arbitrations:1817 Origin: The NYSE constitution first provided for the internal resolution of disputes among members.1872 Expansion: The NYSE became the first securities exchange to offer arbitration for customer disputes against members.
1869 Amendment: The NYSE amended its constitution to require members to submit to arbitration if requested by a non-member.Goal: It was designed as an inexpensive and efficient forum to resolve disputes, particularly necessary as stock values changed rapidly.These early efforts laid the groundwork for modern securities arbitration, which later consolidated under FINRA in 2007.
Supposedly, the “goal” was to provide “an inexpensive and efficient forum to resolve disputes, particularly necessary as stock values changed rapidly.” However, in reality, arbitration, particularly securities arbitration, much like disputes in other industries, by arbitrators with knowledge of industry rules, customs and standards.
These early efforts laid the groundwork for modern securities arbitration, which later consolidated under FINRA in 2007. Investors, and specifically the public investor advocate bar association or PIABA, together with the industry made great stride to eliminate manadatory industry arbitrators judging customer cases, and the abolition of motions to dismiss, except for specific circumstances in advance of an evidentiary hearing. Sure FINRA, formerly, the National Association of Securities Dealers, Inc., is a “self-regulatory organization,” privately owned and controlled by its members. Everyone has their interests. Industry lawyers, and lawyers that represent investors, have always had at least a seat at the table (NAMC), amending the Discovery Guide, or arbitrator classification. However, FINRA, and for that matter, the SEC have always been for the most part non-partisan.
All that changed in 2o24. Just after the November 2024 election, The Financial Industry Regulatory Authority has quietly scrubbed its website of pages promoting the broker regulator’s racial justice and diversity, equity, and inclusion efforts amid a conservative backlash against DEI programs.
A FINRA web page titled, “Working to Advance Racial Justice,” disappeared this month, according to a Bloomberg Law review of the nonprofit organization’s website. A “Diversity, Equity & Inclusion (DEI)” page vanished sometime after an internet archiving tool last spotted it in July.
Both now redirect to an “Inclusive Workplace” page, describing FINRA’s commitment “to fostering an inclusive and equitable workplace” within its own offices. Direct references to “racial justice,” the phrase “diversity, equity, and inclusion,” and the “DEI” acronym are absent from the page, as is information about related FINRA initiatives targeting the brokers the organization oversees and the communities they serve. The changes came as FINRA reworked the design and content of its home page this year.
FINRA, which Congress authorized to police more than 624,000 brokers, “should be abolished,” according to the Project 2025 “Mandate for Leadership: The Conservative Promise,” a roadmap for a Republican administration which warns financial regulators against pursuing DEI policies, drawing on concerns the programs are discriminatory. President-elect Donald Trump has tried to distance himself from the project’s recommendations, though former officials and trusted advisers from his presidential administration spearheaded the effort.
A conservative anti-DEI campaign has led Ford Motor Co., Lowe’s Cos., and other companies to rejigger policies. The National Legal and Policy Center also has introduced proxy proposals pressuring the boards of McDonald’s Corp., JPMorgan Chase & Co., and American Express Co. to reconsider current policies linking executive pay to diversity goals.
The House Oversight and Accountability Committee on Wednesday is marking up a bill that would dismantle DEI programs at agencies across the federal government and for companies that hold federal contracts. The bill faces long odds of being enacted this session of Congress with time running out on the calendar and Democrats in control of the Senate. But it signals potential priorities next year with Republicans leading both chambers and Trump returning to the White House.
“FINRA has been revamping FINRA.org over a period of months as we continually work to improve the user experience, and that process is ongoing,” FINRA spokesperson Ray Pellecchia said in a statement to Bloomberg Law on Tuesday. He declined to comment further.
On March 2, 2026, FINRA issued Regulatory Notice 26-06 (“RN 26-06”). Public Comments to the proposed changes include:
Forum Selection
Question A(i).2: Should FINRA no longer allow in its arbitration forum certain categories of claims (e.g., of a certain complexity or value)?
This question presupposes that arbitrators are not qualified to decide a dispute that may be considered complex or that are over a certain valuation. How would complex be defined and by whom remains elusive. Further, how would the certain threshold valuation be determined and by whom? These unanswered questions clearly indicate that this portion of RN 26-06 is designed to limit the potential monetary exposure of FINRA member firms and associated persons – both at the expense of main street investors.
Question A(i).4: Should FINRA permit arbitration in its forum only where both parties agree to such arbitration post dispute?
As aptly put: “This question is once again designed to provide FINRA member firms and their associated persons with economic leverage over main street investors who, postdispute, would be subject to economic extortion in view of the fact that arbitration is overwhelmingly viewed as being faster and less expensive than court house litigation.”
Eligibility and Motions to Dismiss
Question B(i).2: Should FINRA amend the eligibility rule to expressly allow claims inFINRA’s arbitration forum that arise from transactions or wrongful events that occurred more than six years prior to the claim being filed if, for example, there are ongoing
damages or concealment of the harm?
As stated in RN 26-06, “[b]roker-dealers and investment advisers often require customers to enter into agreements to arbitrate disputes arising from the services provided to such customers, as a condition to opening an account.”
This question is disingenuous, at best, in view of the fact that all of FINRA’s arbitrator training materials already provide for the filing of claims that arose more than six years prior to the date of filing if there was concealment of the harm and/or ongoing damages.
If, for example, the eligibility rule was to be so amended, who would decide if there were ongoing damages and/or concealment of the harm, how would both of those terms be defined and, most importantly, what standard and at what stage of the arbitration proceeding would a motion to dismiss be permitted (i.e., before the discovery phase of the arbitration proceeding or after?).
Arbitrator Classification and Selection
Question D.1: Should FINRA amend the definition of “public arbitrator” provided in Rules 12100(aa) and 13100(x) to modify or remove any of the criteria that disqualify an arbitrator from service as a public arbitrator to expand the public roster? If so, which criteria and why?
As one commentator suggests; ” This question is a blatant attempt to reverse the public arbitrator definition rules that were enacted about a decade ago, on a bi-partisan basis, so that arbitrators with ties to the securities industry would not be potentially biased against public investors in arbitration proceedings. It is ironic that FINRA, which touts its supposed neutrality as administrator of its arbitration forum, would even consider stacking the public arbitrator pool with more individuals who have a connection to member firms and/or their
associated persons.
Arbitrator Training
Question E.3: Should FINRA implement additional training requirements on substantive elements of law or complex investment products for all arbitrators beyond the Basic Arbitrator Training Program?
Again, as one commentator suggests: “This question once again raises the issue as to who would decide what substantive elements of law or complex investment products would need to be included in the arbitrator training materials, what would those elements and/or descriptions consist of and what involvement, if any, would public investors and/or their advocates have in the formulation of those training materials.”
Hearing Oversight and Efficiency
Should FINRA establish a central contact point or support system to assist arbitrators with procedural or evidentiary questions during proceedings?
Many arbitators are untrained, and unless they are experienced, they often do not understand the intricacies of the Code of Arbitration Procedure, or often basic principles of securities law. They are also miseducated as the result of hearing one-sided expungement claims, where legal claims and contentions go unchecked, without adversity. Many of the newly added FINRA arbitrators, although more diverse, often do not have law degrees. However, everyone has their friends and frequent fliers, and there is no such thing as a “neutral administrator,” but if there was it would probably be from the same group of people that rig the supposedly randomly generated neutral list selection.
Punitive Damages
Finally, it is this portion of RN 26-06 which raises the most troubling issues that, if adopted and/or modified, would undermine investor protection and relegate the FINRA arbitration forum to a system which systemically deprives individual investors of their constitutional rights and general historical principles of equity and fairness.
The questions presented on this issue include the following:
• Should FINRA maintain the current framework that allows arbitrators to award punitive
damages?
• Should FINRA permit parties to agree in pre-dispute arbitration agreements to
preclude or limit punitive damages?
• Should FINRA impose a cap on punitive damages awards to address concerns about
excessive awards in the absence of judicial safeguards?
• Should FINRA require that arbitrators considering requests for punitive damages have
additional experience and qualifications?
• Should FINRA develop an arbitration appeals process relating to awards of punitive
damages?
There is no doubt that, through the publication of these questions, FINRA, to prevent being subsumed by the SEC, and lose their entire $100 million annual profit center, seeks to placate its members and its corporate special interests, through the limitation of potential punitive damages awards that arbitrators are empowered to render in customer-initiated arbitration proceedings.
Consider, for example, the recent speech that FINRA’s CEO gave before the SIFMA Compliance & Legal 2026 Annual Conference where he allegedly “noted that some of the proposed changes, such as those related to punitive damages, would historically have impacted a very small portion of cases and presented FINRA with the opportunity to make changes while preserving the core of the arbitration program.”
‘Diversity’ Becomes ‘Differences’
FINRA’s racial justice page had existed since at least 2021, detailing its efforts to fight racism and discrimination within the organization, the financial services industry, and elsewhere, according to information preserved by internet archiver the Wayback Machine. The page, last archived in August, served as an information hub for a now-defunct Racial Justice Task Force at FINRA.
The regulator created the task force in 2020 after George Floyd’s murder by police led to a corporate reckoning over the treatment of minorities. FINRA disbanded the task force in 2022, folding the group’s work into the Diversity Leadership Council the regulator created in 2009. The council has 22 FINRA employees “tasked with developing and implementing a robust diversity and inclusion strategy” at the organization, according to the group’s web page.
The racial justice page listed several FINRA initiatives, including investor education aimed at diverse communities, outreach to underrepresented firms, and the regulator’s Industry Diversity Advisory Committee. The panel, launched in 2022 to improve DEI in the securities industry, is still active.
FINRA Is Giving BDs a Heads-Up About Exams.
In January, FINRA “started to notify member firms not only about this initiative, but also the quarter during which we plan to conduct an examination,” Reese continued. “Again, this change supports our FINRA Forward [rulebook revamp] goals by providing firms greater visibility around resource planning and allocation while maintaining, of course, the flexibility we need for our risk-informed examination approach.”
For more almosy thirty years, the whole idea was “unannounced” office inspections. In January 1997, the SEC issued a warning that:
the securities industry should be on notice, however, that where a firm employs branch offices made up of only one or two registered representatives and those individuals engage in misconduct, the Commission will, as it does for all firms, closely examine the responsibility of individuals charged with the duty to design and implement an adequate system of supervision.
In re Royal Alliance Associates., 63 S.E.C. Docket 1601 at 7.
Following the SEC decision, in May 1998, the NASD issues Notice to Members 98-39, reminding members of their Supervisory And Inspection Obligations, and suggesting that “Members should note the Royal Alliance” decision, which among other things “emphasized the need for close attention to supervision of small, dispersed offices.” NASD Notice to Members 98-38 at 274 (May 1998)(Appendix “E”).
NASD Notice to Members 98-38 also stated that:
The purpose of this Notice is to remind members of their supervisory and inspection obligations for all of their associated persons and offices. Member firms must supervise all of their associated persons—regardless of location, compensation or employment arrangement, or registration status—in accordance with the NASD By-Laws and Rules. The fact that an associated person conducts business at an unregistered office or is compensated as an independent contractor does not alter the obligations of the individual and the firm to comply fully with all applicable securities regulatory requirements.
NASD Notice to Members 98-38 at 273 (May 1998).
In June 1999, the NASD issued Notice to Members 99-45, offering specific guidance as to the types of activities a member must review that occur at each of its offices, and again recognizing that:
Some associated persons working in these unregistered offices may be involved in other business enterprises, such as insurance, real estate sales, accounting, tax planning, or investment advisory services, and consequently may be classified for compensation purposes as part-time employees or independent contractors. Some unregistered offices also operate as separate business entities under
names other than those of the members.
While the NASD does not encourage or discourage such arrangements, a large number of geographically diverse offices presents the potential that sales practice problems will not be as quickly identified as in larger, centralized branch offices. This increased potential must be taken into account when drafting supervisory procedures.
NASD issued Notice to Members 99-45 at 296 (June 1999) See also, Sarah B. Estes, Supervision of Independent Broker Dealers: From Royal Alliance to NTM 99-45, North American Securities Administrator Assoc., Enforcement Law Reporter (2000)(supervision of non-traditional broker-dealer network offices).
Similarly, in March 2004, the SEC issued Staff Legal Bulletin No. 17, concerning: Remote Office Supervision (and again referencing the Royal Alliance decision in a footnote), and expressing the Staff’s concern that:
Some broker-dealer firms have geographically dispersed offices staffed by only a few people, and many are not subject to onsite supervision. Their distance from compliance and supervisory personnel can make it easier for registered representatives (representatives) and other employees in these offices to carry out and conceal violations of the securities laws
Staff Legal Bulletin No. 17 (March 19, 2004).
FINRA Foward is really Investor Backwards.
Nicholas J. Guiliano has more than thirty years experience representing investors. He is “AV Rated,” (Highest Rating in Both Legal Ability & Ethical Standards) by Martindale Hubbell, and has also been selected as a Martindale Hubbell Client Champion. Mr. Guiliano has an AVVO Rating of 10 (Superb), has received the AVVO Five Star Rated Client’s Choice Award, and for more than a decade, Nicholas J. Guiliano has also been honored as one of America’s Most Honored Lawyers (Top 10% Nationwide).
The Guiliano Law Group, P.C. National practice exclusively representing investors in claims against brokerage firms for securities fraud, the sale of unsuitable investments, defective financial products, breach of fiduciary duty, and the failure to supervise. FINRA Securities Arbitrations. Contingent fee. Free Consultation
