The Securities and Exchange Commission on Thursday approved amendments to FINRA rules to increase the number of arbitrators on the public arbitrator list that FINRA sends to parties during the arbitration panel selection process from 10 to 15.
The amendments – made to FINRA Rule 12403 (Cases with Three Arbitrators) of the Code of Arbitration Procedure for Customer Disputes (Customer Code) – also increase the number of “strikes” to the public arbitrator list from four to six, so that the proportion of strikes is the same under the amended rule as it is under the current rule, according to FINRA.
FINRA allows parties to participate in selecting the arbitrators who serve on their cases. Parties select their arbitration panel from computer-generated lists of arbitrators that FINRA sends them. When parties collectively strike all of the nonpublic arbitrators from the list, FINRA fills all three panel seats from the two 10-person lists of public arbitrators.
The amendments will become effective for all arbitrator lists FINRA sends to parties on or after Jan. 3, 2017, for panel selection in customer cases with three arbitrators.
FINRA says it amended the two rules because it believes that “parties should have a greater choice of public arbitrators during the panel selection process.”
Under FINRA Rule 12403(a), in customer cases with three arbitrators, FINRA sends the parties three lists: a list of 10 chair-qualified public arbitrators, a list of 10 public arbitrators and a list of 10 nonpublic arbitrators.
As FINRA explains, the parties select their panel through a process of striking and ranking the arbitrators on the lists.