By Patricia Uceda, Fall 2014 Graduate Research Assistant
The SEC approved FINRA’s proposed rule change to amend FINRA’s Code of Arbitration Procedure for Customer Disputes and the Code of Arbitration Procedure for Industry Disputes to increase certain fees for the overall purpose of increasing arbitrator honoraria.
Currently arbitrators are compensated at the rate of $200 per hearing session, with an additional $75 per day if the arbitrator serves as the chairperson at the hearings on the merits. This is significantly less than what a typical arbitrator would charge in a private proceeding.
FINRA had received numerous complaints from arbitrators that the honoraria was not sufficient. They believed that it was becoming a barrier to recruiting, and that increasing honoraria was needed to recruit high-quality arbitrators. In order to fund these honoraria increases, FINRA will increase the fees charged to investors and member brokers when arbitrating a dispute before FINRA.
Specifically, FINRA is increasing filing fees, hearing session fees, process fees, member surcharge fees, and simplified arbitration fees. The increased filing fees for investors and member brokers will only apply to claims of more than $500,000, and a portion of them may be refundable. The increased hearing session fees for investors and member brokers will also only apply to claims of more than $500,000. Additionally, arbitrators have the authority to apportion the fees in any manner, including charging them entirely against one party.
These increases will allow FINRA to increase arbitrator honoraria from $200 to $300 per hearing session, with chairpersons receiving an additional $125 per day. Additionally, the fee paid to arbitrators who decide simplified arbitration cases will be increased from $125 to $350. Hopefully these increased fees will have the desired effect of attracting highly qualified arbitrators who are able to thoroughly consider all arbitration issues presented and protect the investing public.