An organization of attorneys has suggested that the Financial Industry Regulatory Authority revise its proposal to update its arbitrator selection procedures, AdvisorHub reports.
In December, FINRA filed a rule change with the Securities and Exchange Commission designed to provide both parties in an arbitration with a written public explanation detailing why an arbitrator was removed for conflicts of interest during a review of arbitrator names.
Recently the Public Investors Advocate Bar Association (PIABA) asked FINRA to create a database that would include explicit details about why proposed arbitrators were retained or rejected after allegations of conflict of interest.
The proposal was contained a letter to the SEC, which posted FINRA proposal’s on Jan. 6 and solicited public comments for the next three weeks. PIABA President Hugh Berkson said the database “would give parties insight that would help them in understanding what FINRA considers to be a legitimate ground for a challenge to a potential arbitrator and provide greater transparency, consistency and fairness to the process.”
FINRA began work on bringing more transparency to its arbitrator selection process after a Georgia judge vacated a decision by FINRA arbitrators in favor of Wells Fargo in a dispute with a former client. The judge said that FINRA had permitted Wells Fargo and its counsel to manipulate the arbitrator selection process to remove arbitrators with a history of ruling against Wells Fargo.
It was after that ruling that FINRA hired a law firm to conduct an independent review of its procedures for selecting arbitrators. The firm found no evidence of any improper agreement to keep certain arbitrators off cases but did recommend that FINRA bring greater clarity to the arbitration selection process.
The attorneys at Lewitas Hyman have handled hundreds of arbitrations before FINRA, the Chicago Board Options Exchange, the Chicago Board of Trade, JAMS, the American Arbitration Association and other self-regulatory organizations nationwide. We have also appeared in courts throughout the United States in various securities-related matters. For more information about our arbitration and litigation services, please contact Lewitas Hyman at (888) 655-6002 or through our online contact form.