Arbitrator Selection

FINRA’s arbitrator appointment process uses the Neutral List Selection System (NLSS), a computer algorithm, to randomly generate lists of arbitrators from FINRA’s arbitrator roster.  The number of lists generated, and the number of arbitrator names per list, depend on the specific case type.

Investor Cases

Cases Decided by One Arbitrator

In investor cases with claims of up to $100,000, the parties receive one list of 10 chair-qualified public arbitrators.  Each separately represented party may strike up to four arbitrators on the list, leaving at least six arbitrator names remaining on each party’s list. Parties may rank the remaining arbitrators on each list.  

Cases Decided by Three Arbitrators

In investor cases with claims in excess of $100,000, the parties receive three lists (one with 10 chair-qualified public arbitrators; one with 15 public arbitrators; and one with 10 non-public arbitrators).  Each separately represented party may strike up to four of the 10 arbitrators on the chair-qualified list, up to six of the 15 arbitrators on the public list, and up to 10 of the 10 arbitrators on the non-public list.  All parties in investor cases have the option to select an all-public panel by striking all of the arbitrators on the non-public list.  Parties may rank the remaining arbitrators on each list.    

Industry Cases 

For arbitration claims that involve only industry parties and that do not contain a statutory discrimination claim, the arbitrators are selected by the parties as follows:

Disputes Between Brokerage Firms

Cases Decided by One Arbitrator

For claims of up to $100,000, the parties receive one list of 10 chair-qualified non-public arbitrators.  Each separately represented party may strike up to four arbitrators on the list, leaving at least six arbitrator names remaining on each party's list.  The parties may rank the remaining arbitrators on the list.

Cases Decided by Three Arbitrators

For claims of more than $100,000 for unspecified or non-monetary claims, the parties receive two lists (one including 10 non-public chair-qualified arbitrators, and one including 20 non-public arbitrators).  Each separately represented party may strike up to four names from the non-public chair-qualified arbitrators and up to eight arbitrators from the non-public arbitrator list.  The highest ranked arbitrator from the chair-qualified list and the two highest ranked arbitrators from the non-public list will be appointed to the panel.  

Disputes Between Brokers and Between or Among Brokerage Firms and Brokers

Cases Decided by One Arbitrator

For claims of up to $100,000, the parties receive a list of 10 chair-qualified public arbitrators.  Each separately represented party may strike up to four arbitrators on the list, leaving at least six arbitrator names remaining on each party's list.  The parties may rank the remaining arbitrators on the list.

Cases Decided by Three Arbitrators

For claims of more than $100,000 for unspecified or non-monetary claims, FINRA will send three lists (one with 10 chair-qualified public arbitrators, one with 10 public arbitrators, and one with 10 non-public arbitrators).  Each separately represented party may strike up to four arbitrators on each list, leaving at least six arbitrator names remaining on each party's lists.  The parties may rank the remaining arbitrators on the list.

Conflicts of Interest

NLSS automatically excludes arbitrators from the lists based upon known conflicts of interest, such as when the arbitrator is currently employed by or currently has a securities account with a party.  FINRA staff also manually screen arbitrators to check for other current conflicts (e.g., when the proposed arbitrator currently works at the same law firm as counsel for one of the parties), so that the parties’ choices are not reduced during the selection stage.  FINRA staff document in writing the specific reason that an arbitrator is replaced on a list based on a current conflict.   

Selection Pools to Populate Arbitrator Lists

In order to populate the lists, NLSS requires a minimum number of available arbitrators (“pool”) from which to randomly select names.  This pool size is equal to the number of arbitrators needed to fill a standard list, multiplied by two.  For example, in a customer case decided by three arbitrators (which will have 10 names on the chair-qualified public list, 15 names on the public arbitrator list, and 10 names on the non-public arbitrator list), NLSS requires a  pool size for each list of: 1) 20 chair-qualified public arbitrators; 2) 30 public arbitrators; and 3) 20 non-public arbitrators.  A chair-qualified public arbitrator is eligible to appear on both the chairperson list and the non-chair public arbitrator list (but not in the same case). 

NLSS Random List Selection Process

The NLSS arbitrator list selection process is random.  The randomized process has been verified by an Ernst & Young audit in a report that confirmed that a “random pool management algorithm [is] used to ensure that each arbitrator in the pool has the same opportunity to appear on a list as all other arbitrators in that pool.”

NLSS uses up to three “passes” to ensure that there is a sufficient arbitrator pool from which to generate random lists:  

Pass One – All Local Arbitrators

A list will be populated on the first pass when NLSS can select from a local pool of at least two times the number of required arbitrators per list.  A local arbitrator is one who serves in the hearing location closest to their primary address.  If there are multiple hearing locations within 75 miles of an arbitrator’s primary address, the arbitrator is considered local to each of those hearing locations.  

Pass Two – Arbitrators Traveling at FINRA’s Expense

If local arbitrators alone cannot fill the minimum pool, NLSS will supplement the pool by adding arbitrators from other hearing locations who previously agreed to travel at FINRA’s expense to that hearing location.  

Pass Three – Arbitrators Not Pre-Screened to Travel

In extremely rare circumstances, the first two passes will not be sufficient to fill the pool.  If so, FINRA staff will designate additional hearing locations from which NLSS can randomly select arbitrators.  However, the arbitrators in these locations are not pre-screened with respect to their willingness to travel to the hearing.  

Continual Monitoring to Ensure Sufficient Pool Sizes

FINRA staff routinely analyzes the number of available arbitrators of each classification (i.e., public or non-public) in each of FINRA’s hearing locations.  This analysis ensures that there will be a sufficient number of available arbitrators for panel selection in each hearing location.  If FINRA staff determine that additional arbitrators of a particular classification in a specific hearing location are needed, all arbitrators of that classification in an alternate hearing location are invited to travel at FINRA’s expense.  All arbitrators who agree to travel at FINRA’s expense are designated accordingly in NLSS and only supplement local pools when a local pool is insufficient to populate the required list.  

For reference, a complete breakdown of the number and classification of available arbitrators in each hearing location is available on FINRA’s Dispute Resolution Statistics Web page, which is updated monthly.  The hearing location chart reflects the number of local and non-local arbitrators available in each hearing location.  

Special Pools

Periodically, FINRA staff establish special pools of arbitrators to service an influx of cases in a particular hearing location.  Currently, we maintain a roster of arbitrators who have agreed to travel to Puerto Rico to adjudicate the large number of Puerto Rico Bond Fund cases.  A breakdown of that special pool is also available on FINRA’s Dispute Resolution Statistics Web page.

Customer Code Rules 12400-12403 and 12800; Industry Code Rules 13400-13406 and 13800.

Other Types of Intra-Industry Claims

For arbitration claims that involve only industry parties and that involve a statutory discrimination claim, promissory note proceedings, or permanent injunctive relief, please refer to the appropriate rule for the arbitrator selection rules:

Challenges for Cause

The following list, though not exhaustive, shows examples of circumstances where a challenge for cause would likely be granted. Generally, absent good cause, a party's ability to challenge an arbitrator(s) may be deemed waived if the challenge is not timely filed after a new disclosure is discovered by a party.

Opinion and Bias

  • Arbitrator has a firm opinion or belief as to the subject of a case for which he or she is an arbitrator.
  • Arbitrator has a personal bias toward a party or party representative.

Personal Relationships

  • Arbitrator is or was related by blood or marriage to a party, its attorneys or witnesses.
  • Arbitrator is or was a party's guardian.

Business Relationships

  • Arbitrator is or was a business partner, vendor, customer or client of a party.
  • Arbitrator is a surety or guarantor of the obligations of a party.
  • Arbitrator is currently a creditor or shareholder of any corporate party, or has any business relationship with a party.
  • Arbitrator is or was a conservator or conservatee, employer or employee, principal or agent, or debtor or creditor of either a party or an officer of a corporation which is a party.
  • Arbitrator is the parent, spouse or child of a person who is or was a conservator or conservatee, employer or employee, principal or agent, or debtor or creditor of either a party or an officer of a corporation which is a party.

Current Involvement

  • Arbitrator is adverse to a party, its attorneys or witnesses.
  • Arbitrator is a party to or the subject of a complaint, arbitration or litigation involving a securities investment.
  • Arbitrator is currently an expert witness for a party.

Previous Involvement

  • A party, its attorneys or witnesses previously accused an arbitrator of wrongdoing in a prior action.
  • A party, its attorneys, or witnesses filed a motion to vacate challenging an award in a case in which the arbitrator had participated and signed the award.
  • Arbitrator issued a complaint against a party, its attorneys or witnesses, in an action instituted or resolved during the past five (5) years.
  • Arbitrator or any member, shareholder or associate of, or of counsel to his or her law firm, has had an attorney/client relationship with a party within three (3) years of the filing of the arbitration claim.
  • Arbitrator or any member, shareholder or associate of, or of counsel to his or her law firm, has had an attorney/client relationship adverse to a party within three (3) years of the filing of the arbitration claim.

Financial Interest

  • Arbitrator knows that he or she has, individually or as a fiduciary, a financial interest in the subject matter in controversy or in a party in the arbitration proceeding, or any other interest that could be substantially affected by the outcome of the arbitration proceeding.
  • Arbitrator's immediate family member (as defined in Rule 12100) has a financial interest in the subject matter in controversy or in a party in the arbitration proceeding, or any other interest that could be substantially affected by the outcome of the arbitration proceeding.

Expert Witnesses

  • An arbitrator in this matter testified as an expert witness against a party during the past (5) years.
  • An arbitrator in this matter testified as an expert witness for a party during the past (5) years.
  • An arbitrator in this matter was retained as an expert witness (but did not testify) in an action involving a party during the past three (3) years.
  • An arbitrator in this matter was retained as an expert witness by a party's counsel, or his or her law firm, in an action during the past three (3) years (where no party in this matter was involved in the earlier action).