FINRA Arbitration Task Force Issues Final Report
Explained Decisions, Increased Arbitrator Honoraria, Creation of a Special Arbitrator Panel for Expungement Hearings Among Recommendations
WASHINGTON — A FINRA Dispute Resolution task force has issued its final report with recommendations detailed in the Final Report and Recommendations of the FINRA Dispute Resolution Task Force.
In July 2014, FINRA formed a 13-member task force composed of individuals representing a broad range of interests in securities dispute resolution to consider possible enhancements to its arbitration and mediation forum. The task force—which included counsel representing investors, counsel representing securities firms, arbitrators, a mediator, a state regulator, an academic, and a consumer advocate—was asked to suggest strategies to enhance the transparency, impartiality and efficiency of FINRA's securities dispute resolution forum for all participants. The task force and its subcommittees met a total of 57 times over a period of 14 months, and established an email inbox to solicit comments. In addition, the task force solicited written comments from more than 30 interested organizations and individuals.
The following were among the task force's 51 recommendations:
- an increase in arbitrator honoraria from $300 to $500 per session (from $600 to $1000 a day);
- explained decisions as a default choice with a single party opt-out provision;
- creation of a pool of trained, experienced arbitrators to conduct expungement hearings in settled cases and in cases brought solely for the purpose of seeking expungement; and
- an automatic mediation process for cases filed in arbitration, subject to an opt-out provision.
The task force's recommendations will next be reviewed by the National Arbitration and Mediation Committee (NAMC), FINRA's Standing Board Advisory Committee. The NAMC will meet to discuss the report and can make recommendations on items to implement immediately, items that will require further discussion and items that may not be feasible.
Richard Ketchum, FINRA Chairman and Chief Executive Officer, said, "FINRA convened the task force from a diverse group—representing a broad range of viewpoints—to look at all aspects of dispute resolution between investors and brokers. It is clear from the report that they did a tremendous job examining all of the key issues and made important recommendations that will better position the forum in the long term."
Richard Berry, Executive Vice President, FINRA Dispute Resolution, said, "I wish to thank the members of the task force for their hard work and their thoughtful discussions on ways to enhance FINRA's dispute resolution forum for all participants. We look forward to the NAMC's recommendations."
Serving on the Arbitration Task Force were: Barbara Black, (Retired) Professor and Director, Corporate Law Center, University of Cincinnati College of Law (Chair); Philip Aidikoff, investor attorney, Aidikoff, Uhl & Bakhtiari; Joseph Borg, Director, Alabama Securities Commission; Philip Cottone, FINRA non-public arbitrator and mediator; John Cullem, FINRA public arbitrator; Sandra Grannum, industry attorney, Davidson & Grannum; Mark Maddox, investor attorney, Maddox Hargett & Caruso; Kevin Miller, General Counsel & Chief Compliance Officer, Securities America; Joseph Peiffer, investor attorney, Peiffer Rosca Abdullah Carr & Kane; Barbara Roper, Director of Investor Protection, Consumer Federation of America; Lisa Roth, CEO, Keystone Capital Corporation; Edward Turan, Managing Director, Citigroup Global Markets; and Harry Walters, Managing Director, Morgan Stanley Wealth Management.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.