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FINRA Seeks Comments on Changes in Arbitration Rules

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The Financial Industry Regulatory Authority issued requests for comment Wednesday on two arbitration-related proposals: one to expand the options available to investors when filing a claim in arbitration against an inactive firm or associated person, and another related to compensated non-attorney representatives providing public investors an alternative to representation by attorneys in disputes between investors and broker-dealers.

Regulatory Notice 17-33 proposes amendments to FINRA’s arbitration rules to allow customers to withdraw an arbitration claim, amend pleadings, postpone hearings, and receive a refund of filing fees under these circumstances.

Under the planned changes, FINRA proposes to expand the options available to customers in situations where a firm or associated person is no longer in business either at the time the claim is filed or during a pending arbitration.

Similar to the current rules and procedures relating to claims filed against firms no longer in business, the proposed amendments would allow customers to evaluate the likelihood of collecting on an award and make an informed decision about whether to proceed in arbitration, to file the claim in court or to amend his or her claim to add other respondents from whom the customer may be able to collect should the claim go to award.

“The proposed amendment is intended to help further address the issue of unpaid customer arbitration awards by expanding the options available to customers,” said Richard Berry, executive vice president of FINRA’s Office of Dispute Resolution.

FINRA is also conducting a review of the efficacy of continuing to allow compensated non-attorney representatives (NAR firms) to represent customers in arbitration. Regulatory Notice 17-34 requests feedback on questions related to forum users’ experiences with NAR firms.

“While NAR firms provide service to public investors with small claims, among others, some of the alleged inappropriate business practices reported to FINRA raise serious concerns,” Berry added. “Therefore it is prudent for FINRA to consider the representation of parties by NAR firms.”


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