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March 04, 2015 at 10:59 AM
The Securities and Exchange Commission’s recent approval of the Financial Industry Regulatory Authority’s rule stating that individuals who worked in the financial industry for any duration will be called nonpublic arbitrators “will have a detrimental impact on FINRA’s arbitration process,” argues S. Lawrence Polk, partner with Sutherland Asbill & Brennan.
FINRA’s rule amends the customer and industry codes of arbitration procedure to refine and reorganize the definitions of “nonpublic” and “public” arbitrator.
As it stands now, FINRA has 3,567 approved public arbitrators, Polk says, and the new rule will “disqualify a significant number of arbitrators from a ‘public’ classification.”
According to the SEC’s approval order, FINRA estimates that only 13% of current public arbitrators will be disqualified, however, Polk says that he believes it’s more likely that “25% of the pool will be disqualified,” resulting in an “insufficient number of arbitrators to hear and decide upcoming disputes, especially in smaller hearing locations where there already are a limited number of available arbitrators.”
