Public Arbitrator Pilot Program Frequently Asked Questions
Program No Longer Accepting New Cases
| On January 31, 2011, the United States Securities and Exchange Commission (SEC) approved a rule change that allows all investors filing arbitration claims the option of having an all-public panel, greatly increasing investor choice in the FINRA arbitration program. This rule change expands to all investor claims provisions of FINRA’s Public Arbitrator Pilot Program (Pilot Program) that gave investors filing an arbitration claim against participating firms the option of choosing an all-public panel. FINRA stopped accepting new cases in the Pilot Program on February 1, 2011, when the new rule became effective. |
Q1: What is the Public Arbitrator Pilot Program?
On October 6, 2008, FINRA launched a voluntary Public Arbitrator Pilot Program, which allowed investors in cases with a three person panel naming only a participating firm to have a panel consisting of three public arbitrators, instead of two public arbitrators and one non-public arbitrator. FINRA stopped accepting new cases in the Pilot Program on February 1, 2011, the date a new rule incorporating the features of the Pilot Program became effective.
Q2. Which firms participated in the Pilot Program?
Fourteen firms agreed to participate in the Pilot Program. These firms each agreed to contribute a set number of cases to the Pilot Program.
The following firms participated in the pilot:
- Ameriprise Financial Services
- Charles Schwab
- Chase Investment Services
- Citigroup Global Markets
- Edward Jones
- Fidelity Brokerage Services
- LPL Financial
- Merrill Lynch
- Morgan Stanley Smith Barney
- Oppenheimer
- Raymond James
- TD Ameritrade
- UBS Financial Services
- Wells Fargo Advisors
Q3: How were arbitrators selected in Pilot Program cases?
Pilot Program cases used the following standard arbitrator selection procedures:
- Each separately represented party received three lists of potential arbitrators: a list of ten chair-qualified public arbitrators, a list of ten public arbitrators, and a list of ten non-public arbitrators.
- Each separately represented party was permitted to strike up to four arbitrators from the chair-qualified list and four arbitrators from the public arbitrator list, for any reason.
- Each party was given the opportunity to rank the remaining arbitrators on the lists according to preference.
- FINRA consolidated the chair-qualified and public arbitrator lists and appointed the highest-ranked available arbitrator from each list.
The arbitrator selection procedures for Pilot Program cases with respect to non-public arbitrators were as follows:
- Each separately represented party was permitted to strike up to all ten names on the non-public arbitrator list.
- If the parties ranked one or more non-public arbitrators, FINRA appointed the highest-ranked non-public arbitrator who was available to serve. If the parties struck all of the non-public arbitrators, or if all ranked non-public arbitrators were unavailable to serve, FINRA did not appoint a non-public arbitrator to the case.
- FINRA selected the next highest-ranked available public arbitrator to complete the panel.
- In the event no ranked arbitrators remained on the public arbitrator list, or if all remaining ranked arbitrators on the public list were unavailable to serve, FINRA selected the next highest-ranked available arbitrator on the chair-qualified, public list.
- In the event no ranked arbitrators remained on the chair-qualified public list, or if all remaining arbitrators on the chair-qualified list were unavailable to serve, FINRA randomly appointed a public arbitrator to complete the panel, using its MATRICS computer system.
Q4: How has FINRA measured the Pilot Program's results?
While the Pilot Program is no longer accepting new cases, we will continue to update and evaluate the Pilot Program results according to a number of criteria, including but not limited to the following:
- Percentage of eligible investors who chose to participate in the Pilot Program;
- Percentage of investors who chose an all-public panel after electing to participate in the Pilot Program;
- Results of Pilot Program and non-Pilot Program investor cases, including the percentage of cases that settled before award and how quickly they settled;
- Length of hearings;
- Use of expert witnesses in Pilot Program and non-Pilot Program cases; and
- Award results.
For interim results of the Pilot Program, please see FINRA's Summary Sheet with Results.