The Financial Industry Regulatory Authority has notified members of a number of revisions to the process of choosing arbitrators for dispute resolution forums..
In Regulatory Notice 25-16, FINRA said it has amended its Codes of Arbitration Procedure (Codes) to better balance the process for generating the list of public arbitrators sent to the parties in certain customer and industry disputes that have a three-arbitrator panel.
The amendments also make ministerial changes to codify certain current practices to increase transparency in the arbitration forum, establish new timeframes for objecting to and withdrawing requests for additional arbitrator information and filing arbitrator removal motions, and align expungement-related provisions in the Codes.
The amendments become effective January 26, 2026.
The amendments to Rules 12403(a)(3) and 13403(b)(4) apply to arbitrator lists generated on or after January 26, 2026.
The amendments to Rules 12402(c)(2), 12403(b)(2) and 13403(c)(2) apply to requests for additional information about an arbitrator filed on or after January 26, 2026.
The amendments to Rules 12407(e) and 13410(e) apply to motions to remove an arbitrator after disclosure of a party-initiated challenge filed on or after January 26, 2026.
Last year, FINRA changed its rules on the selection of arbitrators for resolving disputes after an independent review by a law firm called for greater transparency and consistency in the process. One change to the process was that a list selection algorithm randomly generates the lists of arbitrators from the roster of arbitrators for the selected hearing location for each proceeding, and excludes arbitrators from the lists based upon current conflicts of interest identified within the list selection algorithm. There are three rosters of arbitrators: public arbitrators, non-public arbitrators and arbitrators who are eligible to serve as chairperson of a panel.
In its regulatory notice, FINRA released details of the new amendments aimed at further reforming the process.
Until now, the process for generating the list of public arbitrators sent to the parties in certain customer and industry disputes that have a three-arbitrator panel, had the technical effect of giving certain public arbitrators greater chances of being selected for a list than other public arbitrators, based solely on whether they were “chair-qualified.” A FINRA chair-eligible arbitrator is a public arbitrator who has completed specific training and experience.
The amendments revise the Codes to provide that, when generating a list of arbitrators from the FINRA public arbitrator roster (“Public List”) in cases with three arbitrators, public arbitrators who are not chair-qualified will have two chances for selection. The amendments do not change the process for generating the list of chair-qualified public arbitrators or appointing chairpersons or enable public arbitrators who are not chair-qualified to now serve as chairpersons.
Under the previous system, public arbitrators who are not chair-qualified were less likely to be selected for a list than chair-qualified public arbitrators. The amendments address this imbalance and increase the chances for public arbitrators who are not chair-qualified to be selected for the Public List by including their names twice on the roster of available public arbitrators used to randomly generate a Public List.
Another amendment allows parties to strike arbitrators from lists for any reason. Once the parties receive the lists of arbitrators generated by the list selection algorithm, they have the opportunity to strike a certain number of arbitrators. The amendment revises Rule 12403(c)(1)(A) to expressly make clear that each separately represented party may strike any or all of the arbitrators from the Non-Public List “for any reason,” which aligns Rule 12403(c)(1)(A) with other provisions in the Codes that describe the striking process.
The full list of amendments to the FINRA arbitration codes can be found here.
The attorneys at Hyman Cotter PC 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 Hyman Cotter PC at 312-291-4600 or through our online contact form.
