Selection of the Arbitrators

This is perhaps the single most important step in the arbitration process. It is process much like jury selection in a court case, where arbitrators are chosen based upon their background and arbitration award history, among other things. Cases can be won or lost during this stage of the process. Because of the importance of the selection of arbitrators who will give you a fair and impartial hearing, you should have an attorney who specializes in securities arbitration cases assist you with this and all other phases of the arbitration process. Often individuals will attempt to file their claim and select arbitrators without the help of an attorney, only to realize too late that they are in over their heads. They are then stuck with their choices for arbitrators, when an attorney would have likely chosen different individuals.

Arbitrators are people from all walks of life and all parts of the country. They consist of everyday people who might be accountants, doctors, lawyers, engineers, bankers, business owners, instructors or others who have been trained and approved to hear cases. The panel consists of two public arbitrators, one from the chairperson list, and one non-public or industry arbitrator. The public panelists have no ties to the financial or brokerage industry whereas the non-public or industry arbitrator is normally someone employed by a brokerage firm or someone with close ties to the industry, such as an attorney.

The selection process begins with FINRA providing you a list of arbitrators available for each of the three categories: public chairperson, public panel member and non-public or industry panel member. The list contains biographical information and awards history on each arbitrator. Each party receives eight (8) arbitrator names for each category and is allowed to strike four (4) names on each list, leaving the remaining four (4) to be selected numerically in order of preference, pursuant to FINRA Rule 12404. In the event that the parties strike all eight names of any category, FINRA uses the Neutral List Selection System (NLSS) to select an additional arbitrator to complete the panel. This arbitrator can only be challenged by the parties for cause. FINRA Rule 12403 increased the number of arbitrators from eight to ten for each category, with the number of strikes remaining the same, with the intention of eliminating the extended list arbitrator, commonly known as a “cram down arbitrator.”

Once the selection is made, each side sends their ranking back to FINRA where the arbitration panel is appointed and the parties are notified of the selections.

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