FINRA Appoints Arbitration Task Force

The Financial Industry Regulatory Authority announced Thursday that it has formed a 13-member Arbitration Task Force to consider possible enhancements to its securities arbitration forum to improve its transparency, impartiality and efficiency.

Richard Ketchum, FINRA’s chairman and CEO, told ThinkAdvisor in an interview the same day that FINRA assembled the task force to “take a fresh look” at the arbitration process, which has been undergoing “dramatic changes” over the past decade.

He noted among the changes the move to “all-public [arbitration] panels.”

Last September, the Securities and Exchange Commission approved a FINRA proposal that would make an all-public panel the default option for choosing the three arbitrators deciding cases involving a claim of $100,000 or more.

Ketchum said during the interview that FINRA continues to hear “criticisms” of the arbitration process “from both sides” — from the industry as well as from investor advocates.

The task force, Ketchum said, “brings together a diverse group of leading investor advocates, academics, regulators and industry representatives, and I am confident that their recommendations will help ensure FINRA’s arbitration process continues to serve the needs of the investing public.”

Linda Fienberg, president of FINRA’s Dispute Resolution, said during the interview that the task force will conduct its first meeting in late September or early October, and that the 13 members will “set their own agenda.”  

The task force will issue a set of recommendations after a full year of review—which Fienberg said will start when they commence their first meeting—to the National Arbitration and Mediation Committee (NAMC), FINRA’s Standing Board Advisory Committee. Ketchum said the task force will not be permanent.

Barbara Roper, director of investor protection for the Consumer Federation of America, a member of the task force, told ThinkAdvisor in an email message that while she’s not going into the review “with set expectations,” and that the task force “won’t know what can be accomplished until the process gets underway,” FINRA “has done a good job of putting together a task force that includes representatives of all the major constituents, and I’m happy to be a part of that.”