FINRA-DR Task Force Report on Securities Arbitrations

FINRA's Dispute Resolution Task Force issued its Final Report in mid-December. The Report reflects the group's consideration of wide-ranging issues affecting the nation's principle dispute-resolution forum for broker-dealers, their associated persons and customers. The Task Force made 51 recommendations for changes to FINRA Arbitrations, including: Improve Arbitrator Quality by:

  • Increasing compensation;
  • Improving recruitment for depth and diversity;
  • Improving selection to provide a pool of 30 in all-public arbitrator cases; achieve earlier and better conflict disclosure, including multiple-appointment conflicts; allow appropriate voir dire;
  • Improving arbitrator training content and frequency.

Encourage Explained Awards by making them mandatory subject to one-party veto, with required Chair training on writing them. Tighten Expungement Proceedings by creating a pool of trained, experienced arbitrators to handle expungement requests in settled cases and those not naming AP's; increasing training and guidance overall; and reviewing state-regulator notification of requests. Small Claims: Develop an intermediate form of adjudication for expedited hearing before an arbitrator that provides parties an opportunity to explain their positions and respond to their adversary. Mediation: Make mediation automatic for all arbitration cases, subject to single-party opt out, with financial incentives that refund some fees for successful mediations. Greater mediator training and recruitment. Motions to Dismiss: Amend Rule 12504(a) to add res judicata as a permissible basis for prehearing motion to dismiss. Case Management - Procedural Issues

  • Ensure expedited hearings really are.
  • Discourage last-minute arbitrator recusals.
  • Add insurance policies to firm discovery guidelines.
  • Revise IPHC script to emphasis parties may modify hearing procedures, including the use of any type of technology, and strongly discourage the practice of phantom retention of experts.
  • Revise FINRA's party portal to allow real-time tracking of costs.

Public Availability of Information

  • Improve the informational content of awards
  • Add substantive decisions, such as injunctive orders or final dismissals, to FINRA's Arbitration Awards Online database.

The Task Force Report is here.

Thomas K. Potter, III ( is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Tom is licensed in Tennessee, Texas and Louisiana. He has over 29 years' experience representing financial institutions in litigation, regulatory and compliance matters. See attorney profile. © 2016 by Thomas K. Potter, III (all rights reserved).

Posted in: Arbitration, FINRA
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