The Financial Industry Regulatory Authority (FINRA) announced the expansion of a two-year pilot program that gives some investors an opportunity to select an arbitration panel composed of three public arbitrators instead of two public and one non-public in certain cases. To be eligible, a case must be against one of 14 participating firms (out of 4,800 member firms), the firm must not have reached its agreed-upon limit on the number of such cases, and the case must have been received by FINRA on or after October 6, 2009. Cases enter the pilot program on a first-come, first-served basis, not automatically, but only if the Claimant makes an election to participate in the program.
The fourteen participating firms with their case limits in parentheses are: Ameriprise Financial Services (18), Charles Schwab (10), Chase Investment Services (10), Citigroup Global Markets (60), Edward Jones (18), Fidelity Brokerage Services (10), LPL Financial (10), Merrill Lynch (60), Morgan Stanley Smith Barney (60), Oppenheimer (15), Raymond James (15), TD Ameritrade (10), UBS Financial Services (60), Wells Fargo Advisors (60). The program will end on October 5, 2010.
Rather than reaching the obvious conclusion that arbitrators should be neutral, and therefore, should not include individuals with ties to the securities industry, FINRA is purportedly conducting an “evaluation” of the industry arbitrator. Critics contend that FINRA is looking for statistics to perpetuate a biased system. After all, FINRA is the former “National Association of Securities Dealers,” not the National Association of Securities Investors.
“We welcome FINRA’s experiment with fairness, even if it amounts to little more than window dressing,” said J. Boyd Page, senior partner of Page Perry in Atlanta. “But there are several things that FINRA could do to advance the perception that investor arbitration is fair and impartial. FINRA should just eliminate the industry arbitrator altogether. It’s time for FINRA to do that. In fact, we would encourage FINRA to use just one public arbitrator in all cases up to a million dollars and to raise the compensation for that one arbitrator to an amount currently being paid to three arbitrator panels. This approach would allow FINRA to attract more qualified arbitrators, would eliminate much of the perception of industry bias and would alleviate some of the problems caused by having three person panels.”
Page Perry is an Atlanta-based law firm with over 125 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 30 occasions. Page Perry’s attorneys are actively involved in representing investors in securities cases. For further information, please contact us.