The Securities and Exchange Commission (SEC) approved Financial Industry Regulatory Authority’s proposed rule change to provide customers in all FINRA arbitrations the option of having an all public panel.
In cases with three arbitrators, the arbitration panels have been comprised of two public arbitrators and one arbitrator with a nexus or connection to the securities industry.
The amended rules will apply to all customer cases in which a list of potential arbitrators has not yet been sent to the parties.
All Public Arbitrator Pilot Program
In October 2008, FINRA started a all public arbitrator pilot program where 14 of the major wire houses or brokerage firms agreed each year to allow a handful of cases, on a first come, first served basis, would be arbitrated before an “all public” arbitration panel, without the required industry arbitrator.
FINRA Filed Rule Proposal With SEC
On October 26, 2010, FINRA filed a rule proposal with the SEC that would allow all investors filing arbitration claims the option of having an all-public panel in arbitration claims filed before FINRA, to which of course, the securities industry opposed.
Based upon date previously released by FINRA, arbitration claims before all public panels were almost 50% more likely to settle or not go to a final award (13% versus 19%), than cases where an industry arbitrator was assigned to the arbitration panel.
Of the cases going to a final arbitration award in the public arbitrator pilot program customers prevailed 68% of the time, almost 40% more than customers that tried their cases at a final hearing before a panel of arbitrators consisting of at least one industry arbitrator.
SEC Approves Rule
The Rule appears to take effect immediately and will apply to all customer cases in which a list of potential arbitrators has not yet been sent to the parties.
Guiliano Law Firm
The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Firm, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost to unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.