FINRA Arbitrator Selection Proposal Favors Claimants

In a news release on September 28, 2010, the Financial Industry Regulatory Authority (FINRA) is filing a proposal next month with the Securities Exchange Commission (SEC) which would allow investors to have the option of an all-public panel. This means that the Claimant could have his or her case heard by a panel with no industry arbitrator. Presently, the three person arbitration panel consists of two “public” arbitrators and one “industry” or “non-public” arbitrator. The “industry” arbitrator is usually somebody who works for a brokerage firm or someone with very close ties to the brokerage industry, such as an attorney. The general feeling is that there is preconceived bias and prejudice in favor of the broker and the firm and against the Claimant. If approved, FINRA hopes that “giving each individual investor the option of an all-public panel will enhance confidence in and increase the perception of fairness in the process.”

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