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.”
Added Roper: “I hope to learn more both through the deliberations of the task force and through outreach to the broader community of investor advocates who work on arbitration issues.”
Securities lawyer Patrick Burns said in an email message that “as things stand right now, the FINRA arbitration process is widely viewed as biased against brokers and clients (and favorable to firms).”
Any improvement, he continued, “in the fairness of the process would be most welcome. Transparency and efficiency could see some improvements as well.”
Burns, who’s eponymous law firm is located in Los Angeles, noted that when arbitration cases are decided, “very little is known about the decisions, unlike court cases. Also, I think most people would agree that too many cases are clogging up the system like promissory note cases and that generally speaking, cases of all types take too long.”
Other members of the task force, comprised of seven public members and six industry members, are:
— Barbara Black – Professor and Director, Corporate Law Center, University of Cincinnati College of Law (Chair);
— Philip Aidikoff – investor attorney, Aidikoff, Uhl & Bakhtiari;
— Joseph Borg – Director, Alabama Securities Commission;
— Philip Cottone – FINRA non-public arbitrator and mediator;
— John Cullem – FINRA public arbitrator;
— Sandra Grannum – industry attorney, Davidson & Grannum;
— Mark Maddox – investor attorney, Maddox Hargett & Caruso;
— Kevin Miller – General Counsel & Chief Compliance Officer, Securities America;
— Joseph Peiffer – investor attorney, Peiffer Rosca Abdullah Carr & Kane; and
— Lisa Roth – CEO, Keystone Capital Corporation
— Edward Turan – Managing Director, Citigroup Global Markets
— Harry Walters – Managing Director, Morgan Stanley Wealth Management
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