Since the Financial Industry Regulatory Authority (FINRA) amended its rules effective January 31, 2011 to allow investors who file securities arbitration claims to opt for an “all-public” panel with no ties to the securities industry (as FINRA defines “ties”), 77 percent of eligible investors have done so, according to Linda Fienberg, president of FINRA Dispute Resolution, which administers arbitration proceedings.
“It’s higher than I anticipated,” Ms. Fienberg was quoted as saying, adding: “I would have thought it would have been 60 to 65 percent.” This shows that skepticism of Wall Street is running high, according to Susanne Craig’s New York Times article, “Investors Opt for Arbitration Panels Without ties to Wall Street.”
Investors who open brokerage accounts must sign customer agreements agreeing to waive their right to sue in court and accept arbitration administered by FINRA to resolve all disputes related to their brokerage account. Until January 31 of this year, in most cases, that meant one of the three arbitrators who would decide their case would have past or present significant ties to the brokerage industry. FINRA finally capitulated to protests by investors and their attorneys that such a system was inherently biased and unfair.
Problems remain with the mandatory arbitration system. FINRA’s definition of a “public” (i.e., “non-industry”) arbitrator still allows someone with past ties to the industry to serve on arbitration panels. But it is a step in the right direction.
Page Perry is an Atlanta-based law firm with over 150 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions. For further information, please contact us.