FINRA Proposing To Give Investors The Option To Have Case Heard By All Public Arbitrators

Under the existing rules, the arbitration panel consists of two “public” arbitrators and one “industry” or “non-public” arbitrator. The “industry” arbitrator is usually an employee of a brokerage firm or someone with very close ties to the brokerage industry. The general feeling is that there is preconceived bias in favor of the broker and the firm and prejudice against the Claimant. In a news release on September 28, 2010, the Financial Industry Regulatory Authority (FINRA) is filing a proposal next month with the Securities Exchange Commission (SEC) which would allow investors to have the option of an all-public panel. The significance is that under the proposal the Claimant could have his or her case heard by a panel with no industry arbitrator. If approved, FINRA hopes that “giving each individual investor the option of an all-public panel will enhance confidence in and increase the perception of fairness in the process.” Nonetheless, arbitrator selection is one of the most important factors in the process which should be done by an attorney who specializes in handling securities arbitration cases.

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