“On Feb. 26, the Securities and Exchange Commission (SEC) approved a change to FINRA’s arbitration rules that places further restrictions on who qualifies as a ‘public’ arbitrator in FINRA proceedings,” writes Daniel T. Hunter, an attorney in Goldberg Segalla’s Business and Commercial Practice Group.
“Generally, public arbitrators (also referred to as non-industry arbitrators) are those who are approved by FINRA to sit on an arbitration panel but are not currently working in the financial industry. The newly approved rule will disqualify a significant number of arbitrators from the public classification — which could lead to a shortage of qualified arbitrators.”
In this Buffalo Law Journal guest column, Daniel examines the potential impact of the new SEC rule on the resolution of disputes involving agreements between investors and stockbrokers — most, if not all, of which are subject to mandatory arbitration agreements. FINRA, the largest independent securities regulator in the United States, provides a forum for arbitrating these disputes. The SEC’s new rule, Daniel notes, aims to address any perceived bias of public arbitrators, as well as enhance the perception of neutrality within FINRA arbitrations.