At its meeting last week, the regulator’s Board of Directors authorized FINRA to file amendments to Rule 12403, which governs panel selection. The changes, which would go into effect upon the SEC’s approval, are focused how consumers choose between public arbitrators, who are unaffiliated with the industry, and those who are non-public, meaning they have worked in the financial services industry.
According to the amendments, parties in all customers cases three arbitrators (meaning
If the parties leave one or more of the same non-public arbitrators on the non-public list, the parties could have a majority public panel, which consists of two public and one-nonpublic arbitrators.
Previously, a majority public panel was the default selection. In 2011, FINRA updated its rule to allow for parties to request an all-public panel. “FINRA believes that providing customers with the right to exclude a non-public arbitrator from the panel deciding their case will enhance customers’ perception of the fairnesss of FINRA’s rules and the securities arbitration process,” the regulator wrote in its 2011 notice.
“This rule is an improvement,” Doss said. “It’s less confusing in that attorneys who may not practice in this area may not miss the fact that they had to ask for an all public panel at the beginning.”
FINRA declined to comment beyond what was offered in the update from the
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