Public Arbitrator Pilot Program Frequently Asked Questions

Q1: What is the Public Arbitrator Pilot Program? 
On October 6, 2008, FINRA launched a voluntary two-year Public Arbitrator Pilot Program (Pilot Program), which allows 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. See Q4 for a list of the participating firms, and Q16 for additional details on how arbitrators are selected.

 

FINRA designed the Pilot Program to give investors greater choice when selecting an arbitration panel. In some cases, investors may prefer to have on their arbitration panel an arbitrator who appears on the non-public arbitrator list. If the investor does not want a non-public arbitrator to serve on the case, then the investor may strike all proposed arbitrators on the non-public list.

 

Q2. When did the Pilot Program start and when does it end?
The Pilot Program runs for two sequential years. Year one began October 6, 2008, and ended October 5, 2009. Year two begins October 6, 2009, and ends October 5, 2010.

 

Q3: What claims are eligible for Year Two of the Pilot Program?
Investors filing arbitration claims that FINRA receives on or after October 6, 2009, naming only a participating firm, in which the parties are entitled to a three-person panel, may elect to proceed in the Pilot Program as long as the participating firm has not fulfilled its Pilot Program case commitment for the given year. The claim must be filed at the following address:

 

FINRA Dispute Resolution
One Liberty Plaza
165 Broadway, 27th Floor
New York, NY 10006
(212) 858-4200

 

The claim must include all necessary documentation, a check for the filing fee, and a clear indication of intent to participate.

 

Q4: Which firms are participating in the Pilot Program for Year Two?
Fourteen firms have agreed to participate in the Pilot Program for Year Two. These firms, known as participating firms, will each contribute a set number of cases to the Pilot Program.


Original Pilot Firms

Year One
Case Limit

Original Year
Two Case Limit

Current Year
Two Case Limit

Ameriprise Financial Services

18

18

18

Charles Schwab

10 (Reached Limit)

10

10

Chase Investment Services

N/A

N/A

10

Citigroup Global
Markets (see Q5)

40 (Reached Limit)

40

60*

Edward Jones

18

18

18

Fidelity Brokerage Services

10

10

10

LPL Financial

10

10

10

Merrill Lynch

40 (Reached Limit)

40

60*

Morgan Stanley
Smith Barney (see Q5)

40 (Reached Limit)

40

60*

Oppenheimer

N/A

N/A

15

Raymond James (see Q6)

N/A

N/A

10

TD Ameritrade

10

10

10

UBS Financial Services

40 (Reached Limit)

40

60*

Wells Fargo Advisors (see Q7)

40 (Reached Limit)

40

60*

 

*Participating firm has agreed to consider committing an additional 15 Pilot Program cases after it reaches 60 cases, or by April 6, 2010, whichever is sooner.

 

Q5: In light of the merger between Morgan Stanley & Co., Inc. and Citigroup's Smith Barney division, how are Pilot Program cases counted towards each firm's case commitment for Year Two?

Citigroup Global Markets, Inc.
Cases that name Citigroup Global Markets, Inc. for events that pre-date the June 1, 2009 merger between Morgan Stanley & Co., Inc. and Citigroup's Smith Barney division will count toward Citigroup Global Markets, Inc.'s Pilot Program case commitment.

 

Morgan Stanley Smith Barney 
Cases that count toward Morgan Stanley Smith Barney's Pilot Program case commitment include:

  • Cases that name Morgan Stanley & Co., Inc. for events that pre-date the June 1, 2009 merger between Morgan Stanley & Co., Inc. and Citigroup's Smith Barney division; and
  • Cases that name Morgan Stanley Smith Barney for events that post-date the June 1, 2009 merger between Morgan Stanley & Co., Inc. and Citigroup's Smith Barney division.

 

Q6. Which Raymond James entities are participating in Year Two of the Pilot Program?
Cases naming Raymond James Financial Services, Inc. or Raymond James & Associates, Inc. count toward Raymond James' Pilot Program case commitment, as long as Raymond James has not yet fulfilled its Pilot Program case commitment.

 

Q7. If I file a claim naming only Wachovia Securities or only Wells Fargo Advisors, can I participate in the Pilot Program?
Yes, any claim naming only Wachovia Securities or only Wells Fargo Advisors, or a claim naming both firms, is eligible to participate in the Pilot Program, as long as Wells Fargo Advisors has not yet fulfilled its Pilot Program case commitment.

 

Q8: Who selects which cases are included in the Pilot Program?
Only the investor can elect to participate in the Pilot Program. The participating firms cannot select which cases proceed in the Pilot Program.

 

Q9: Can the investor elect to participate in the Pilot Program in the Statement of Claim or cover letter?
Yes, the investor may elect to participate in the Pilot Program in the Statement of Claim or accompanying documentation. We recommend that investors clearly indicate their interest to participate in the Pilot Program in the Statement of Claim or accompanying documentation. This will ensure that their election is made on the day we receive these documents.

 

If investors do not elect to participate in the Pilot Program in the Statement of Claim or accompanying documentation, FINRA will send a letter to the investors outlining the Pilot Program's details. The letter will also advise investors that they must decide whether to participate in the Pilot Program within 25 days from receipt of the letter, or before the participating firm has fulfilled its Pilot Program case commitment, whichever is sooner.

 

Q10: Can an investor filing an online arbitration claim participate in the Pilot Program?
Yes, but an online arbitration claim is not deemed filed until FINRA receives hard copies of all of the necessary documentation and a check for the filing fee. Thus, an investor filing an online arbitration claim may participate in the Pilot Program only after we receive HARD copies of all of the necessary documentation and a check for the filing fee.

 

Q11: How does FINRA treat deficient arbitration claims in the Pilot Program?
Pursuant to our rules, deficient cases are deemed filed on the date we receive the claim, not the date the deficiency is cured. A "deficiency" might be the failure to include a properly signed FINRA Submission Agreement, or the failure to include the proper filing fee.

 

If the investor elects in the Pilot Program in the Statement of Claim or accompanying documentation in an eligible claim that is deficient, the case will proceed in the Pilot Program, and will count towards the participating firm's number of committed cases, as long as the deficiency is timely cured. However, if a case in the Pilot Program is closed because the investor fails to cure the deficiency, then the case will not count towards the participating firm's number of committed cases. If, after the case is closed, the investor files a new case that is eligible for the Pilot Program (see Q3) and elects the Pilot Program, the case will be included in the Pilot Program if the participating firm has not fulfilled its case allotment in the intervening time period.

 

If the investor does not elect in the Pilot Program in the Statement of Claim or accompanying documentation in an eligible claim that is deficient, FINRA will only send the letter to the investor outlining the Pilot Program's details (see Q9) after the deficiency is cured.

 

Q12: If an investor elects to be in the Pilot Program, how will FINRA inform the parties whether the case is proceeding in the Pilot Program?
If the investor elects to participate in the Pilot Program in an eligible case, FINRA will send the parties a letter confirming that the case is proceeding in the Pilot Program. If the investor elects to participate in the Pilot Program in a case that is not eligible, FINRA will send the parties a letter advising that the case is not proceeding in the Pilot Program and explaining the reasons.

 

Q13: How will FINRA determine which cases are Pilot Program cases if, on any day, FINRA receives more cases against a participating firm than the remaining number of cases that the firm committed to the Pilot Program?
FINRA will administer a lottery on any day we receive more cases naming a participating firm than the firm's remaining total Pilot Program case commitment. We believe this is the fairest way to determine which cases proceed in the Pilot Program because all cases filed on the same day will have an equal chance to participate.

 

If a situation such as this arises, FINRA will notify the parties whether their cases will be included in the Pilot Program (see Q12).

 

Q14: How will an investor know when the participating firm has fulfilled its commitment of Pilot Program cases for the year?
Once the firm has fulfilled its commitment, FINRA will send correspondence to investors who subsequently elect to participate in the Pilot Program to advise them that the participating firm has fulfilled its number of committed cases (see Q12). We will also provide this information on FINRA's Web site.

 

Q15: Can parties to an arbitration case filed before October 6, 2009, participate in Year Two of the Pilot Program?
No. Only cases received on or after October 6, 2009, are eligible to participate in Year Two of the Pilot Program.

 

Q16: How are arbitrators selected in Pilot Program cases?
Pilot Program cases will retain the following standard arbitrator selection procedures:

  • Each separately represented party will receive three lists of potential arbitrators: a list of eight chair-qualified public arbitrators, a list of eight public arbitrators, and a list of eight non-public arbitrators.
  • Each separately represented party may strike up to four arbitrators from the chair-qualified list and four arbitrators from the public arbitrator list, for any reason.
  • Each party will be given the opportunity to rank the remaining arbitrators on the lists according to preference.
  • FINRA will consolidate the chair-qualified and public arbitrator lists and appoint the highest-ranked available arbitrator from each list.

 

The arbitrator selection procedures for Pilot Program cases will be modified as follows:

 

  • Each separately represented party may strike up to all eight names on the non-public arbitrator list. (FINRA's standard arbitrator selection procedures permit each separately represented party to strike up to four arbitrators from the non-public list.)
  • If the parties rank one or more non-public arbitrators, FINRA will appoint the highest-ranked non-public arbitrator who is available to serve. If the parties strike all of the non-public arbitrators, or if all ranked non-public arbitrators are unavailable to serve, FINRA will not appoint a non-public arbitrator to the case.
  • FINRA will select the next highest-ranked available public arbitrator to complete the panel.
  • In the event no ranked arbitrators remain on the public arbitrator list, or if all remaining ranked arbitrators on the public list are unavailable to serve, FINRA will select the next highest-ranked available arbitrator on the chair-qualified, public list.
  • In the event no ranked arbitrators remain on the chair-qualified public list, or if all remaining arbitrators on the chair-qualified list are unavailable to serve, FINRA will randomly appoint a public arbitrator to complete the panel, using its MATRICS computer system.

 

Q17: What happens if an investor's claim names a participating firm and a broker or a participating firm and a non-participating firm?
Cases such as these are not eligible for the Pilot Program because this is a voluntary program and only those firms listed in Q4 have agreed to participate in the Pilot Program.

 

Q18: What happens if a participating firm adds either a broker or a non-participating firm to a Pilot Program case through a third-party claim (a claim filed by a respondent against a person who is not initially a party to the case)?
If a non-participating firm or broker is a party to the case, the case will no longer be eligible for the Pilot Program. The case will be removed from the Pilot Program and will no longer count towards the participating firm's Pilot Program case commitment.

 

If the parties had chosen a panel of three public arbitrators, FINRA will remove the last appointed public arbitrator and send the parties, including the newly added party, a new list of non-public arbitrators to rank and strike. However, if all parties agree to maintain a three-member public panel, then FINRA will honor the parties' agreement, but the case will not count towards the firm's Pilot Program case commitment.

 

Q19: How will FINRA measure the Pilot Program's results?
We will evaluate the Pilot Program according to a number of criteria, including but not limited to the following:

  • Percentage of eligible investors who choose to participate in the Pilot Program;
  • Percentage of investors who choose 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 settle before award and how quickly they settle;
  • Length of hearings; and
  • Use of expert witnesses in Pilot Program and non-Pilot Program cases.