In response to growing public and political pressure, in a news release dated July 24, 2008, the Financial Industry Regulatory Authority (“FINRA”) announced that it has launched a “pilot program” that scraps the “industry” arbitrator. For “eligible” claims filed on or after October 6, 2008, claimants who elect to participate in the pilot program may choose an arbitration panel composed of three “public” arbitrators instead of two “public” and one “industry” arbitrator (the typical panel composition in a case filed by a customer). Generally speaking, a public arbitrator is one deemed not to be affiliated with the securities industry by FINRA rules governing securities arbitrations. An “industry” arbitrator is affiliated with the securities industry.
Six firms ? Merrill Lynch, Citigroup Global Markets, UBS, Wachovia Securities, Morgan Stanley and Charles Schwab ? have agreed to participate in the two-year pilot program. Schwab has agreed to “contribute” only 10 cases per year for participation in the program, and the other firms have agreed to contribute 40 cases per year. The firms cannot decide which cases will participate in the program. As noted, the pilot program only applies to “eligible” claims filed on or after October 6, 2008. FINRA’s announcement did not clearly define what is meant by “eligible.”