Part 3: FINRA Dispute Resolution Task Force: Enhancing Securities Dispute Resolution One Recommendation at a Time: Arbitrators Continued.

By: Alexandra Hughes, Spring 2016 Graduate Research Assistant

alexhughesThe task force readily identified issues affecting arbitrators as those of greatest importance to the task force, especially when looking into the next 20 years of the FINRA arbitration and mediation forum. This post is a continuation of Part 2. Arbitrators and summarizes the remaining issues the task force considered.

  1. Classification of Public and Non-Public Arbitrators

In 2015, the definitions of non-public and public arbitrators were amended. Essentially, the definitions strengthen the requirements for public arbitrators in ensuring such arbitrators were not too closely associated with the securities industry. The amended definitions raised some concerns that the number of individuals who can qualify as public arbitrators will be reduced. This concern for retaining an adequate number of public arbitrators is emphasized by the all public panel option, which allows parties to strike all non-public arbitrators. The task force recommended FINRA monitor the effects of these new definitions on the arbitrator pool and consider whether the new definitions make otherwise qualified arbitrators unjustifiably ineligible for service as a public arbitrator.

  1. Arbitrator Training

The task force discussed increasing training requirements for arbitrators to ensure arbitrators possess the requisite skills to conduct a fair and effective dispute resolution process. Recognizing that arbitrators could benefit from increased training, the task force recommended:

  • Encouraging arbitrators to complete continuing education programs
  • Compulsory training requirements for: arbitrators with poor evaluations, inexperienced arbitrators, and arbitrations who do not arbitrate regularly
  • Subject-matter training
  • Increased training for chairpersons
  • NAMC engage an outside consultant to design training coursework
  • FINRA identify recurring issues arising during proceedings and develop arbitrator training to address those issues
  • FINRA provide a resource for arbitrators with procedural questions arising during a hearing
  1. Arbitrator Evaluations

Although the task force agreed that arbitrator evaluations were essential to identify poorly performing arbitrators, the task force also reasoned that the process should remain voluntary. Thus, the task force recommended providing more education to arbitrators about the importance of parties filling out evaluations and providing a financial incentive to arbitrators of $50 for completed evaluations.

  1. Encouraging Arbitrators to Provide Input on Rule Changes That Will Affect Them

The task force recognized the importance of keeping arbitrators active in the securities industry and knowledgeable about any proposed rule changes affecting their role. Although FINRA currently accomplishes this task through use of The Neutral Corner, the task force had additional recommendations. Thus, the task force recommended FINRA send a broadcast email to arbitrators about: proposed rule changes, the process for providing input (comment letter) on the proposed rule change, and how rule change affects them as FINRA arbitrators if adopted.

The full task force report is available online.