Part 7: FINRA Dispute Resolution Task Force: Enhancing Securities Dispute Resolution One Recommendation At A Time. Public Availability of Information and Transparency.

alexhughesBy: Alexandra Hughes, Spring 2016 Graduate Research Assistant

  1. Public Availability of Information

As discussed in Part 4 of this blog series, the task force recommended amending FINRA Rule 12904 to require explained decisions unless a party affirmatively opts out. However, requiring explained decisions does not in and of itself ensure increased public availability of information in FINRA’s arbitration forum—improvements in the information content of explained awards is also a necessary component. As such, FINRA recommended the following to enhance the content of arbitration awards:

  • Educate arbitrators about the importance of providing a detailed summary of the issues and products involved in the case in the explained award decision
  • Provide a template for arbitrators to follow which sets out a minimum standard for an explained award decision. For example, arbitrators should describe the claims and defenses presented at the hearing and not just summarize those claims and defenses in the parties’ briefs.

Additionally, the task force recommended expanding the substantive decisions which qualify as awards and thus end up on FINRA’s Arbitration Awards Online Database (AAO). The task force recommended FINRA include: (1) injunctive orders and (2) final dismissals in its database. The public availability of these decisions give parties more relevant information about an arbitrator and therefore enable the parties to better select an arbitrator during the selection process. Although injunctive orders are already noted in final awards, they are not discussed with any specificity.

The task force declined to make recommendations of the following issues related to public availability of information:

  • Making interim and all other written decisions available to parties
  • Posting AAA and JAMS awards to its database
  • Adding monthly statistical reports to its website allowing parties to identify bottlenecks or other delays at particular hearing locations
  1. Transparency

One of the task force’s major objectives was to enhance the transparency of FINRA’s arbitration and mediation. The current lack of transparency is due in part to the nature of the process. Traditionally, arbitration is a confidential process. The parties present their cases in front of an arbitrator, not a public courtroom. Likewise, mediation is a private settlement negotiation between the parties. In order to enhance the transparency of FINRA’s forum, the task force recommended:

  • FINRA adopt a policy promoting the transparency of its arbitration and mediation. Such a policy would promote releasing more data and information to the public, even if the information has to be redacted for personal or confidential information. The task force discussed releasing arbitrators’ evaluations.
  • FINRA reinstate its practice of disclosing the names of the NAMC

The full task force report is available online.