Post Image
FINRA Board Approves Rulemaking on Three Arbitration Items
Posted on Categories Arbitration, FINRA Code of Arbitration, FINRA Task Force, News, RulemakingTags , , , , , ,

FINRA’s Board of Governors met the first week in May and, among other things, approved three arbitration-related rule changes.

We reported in SAA 2016-17 that the Board at its May meeting would consider rulemaking on three items of interest to arbitration practitioners. As announced on FINRA’s Website, the Board planned to consider proposals to amend the Customer and Industry Codes of Arbitration Procedure in three ways: 1) broadening chairperson eligibility requirements; 2) expanding motions to dismiss prior to the conclusion of a party's case in chief; and 3) increasing the number of public arbitrators on the Public Arbitrator list FINRA sends parties during the panel selection process in customer cases. Although, at that juncture, FINRA offered no further details, an update and short video posted on the FINRA Website on May 6th advises that the Board has approved all three proposals, and adds some specifics.

Chairperson Eligibility Requirements

Item 1 consists of proposed changes to Rules 12400 and 13400 (Neutral List Selection System and Arbitrator Rosters) to change the chairperson eligibility requirements. “Specifically, an attorney arbitrator would be eligible for the chairperson roster if he or she completes chairperson training and serves as an arbitrator through award on at least one arbitration, instead of two arbitrations, administered by a self-regulatory organization in which hearings were held.”

Motions to Dismiss in Arbitration

Item 2 features amendments to Rules 12504 and 13504 (Motions to Dismiss) “to provide that arbitrators in its forum may act upon a motion to dismiss prior to the conclusion of a party’s case in chief if the arbitrators determine that the non-moving party previously brought the same dispute against the same party, and the dispute was fully and finally adjudicated on the merits.”

Panel Selection in Customer Cases with Three Arbitrators

Item 3 is a proposed amendment to Rule 12403 (Cases with Three Arbitrators) that “would increase the number of public arbitrators on the list from 10 to 15” while also increasing the number of strikes from four to six “to keep the proportion of strikes the same under the amended rule as it is under the current rule.”

Genesis in Task Force Report?

We opined in SAA 2016-17 that items 2 and 3 seemed to stem from FINRA Dispute Resolution Task Force recommendations contained in the group’s Final Report. Recall that in March, we reported in SAA 2016-10 that FINRA’s National Arbitration & Mediation Committee had its first meeting to consider recommendations in the DRTF Report. Turns out our call was spot on. How do we know? Around the 4-minute mark of the short video describing the Board meeting results, FINRA CEO and Chairman Rick Ketchum says so. Added Mr. Ketchum: “Most importantly, this is the first step in responding to the terrific recommendations of the Task Force.”

(ed: *Good for FINRA! Follow-up and implementation increases confidence in the forum. **As we’ve said in the past, the Board’s actions are the first step in a long journey. This action authorizes staff to file proposed rule changes with the SEC. Next are the actual Rule 19b filings, publication in the Federal Register, public comments, response to comments, rule approval by the SEC, and publication by FINRA of a Regulatory Notice. FINRA nicely describes the process on its Website. We will track the proposed rule change and keep our readers and Twitter followers informed.) (SAC Ref. No. 2016-18-01)

Like what you see here?

Twice a week we present blog posts consisting of one write-up from each of our two flagship weekly online Alert services. Consider a subscription to these publications to receive the full array of coverage right on your desktop every week. Give it a try and sign up for a free trial to the Securities Arbitration Alert and the Securities Litigation Alert.