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Regulation and Compliance > Federal Regulation > FINRA

FINRA Files to Provide 'Greater Transparency' to Arbitrator Selection Process

By Melanie Waddell

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The Financial Industry Regulatory Authority has filed a rule change with the Securities and Exchange Commission to provide greater transparency and consistency regarding the arbitrator list selection process.

The proposed rule change, filed on Dec. 23, would enhance the transparency of the arbitration forum administered by FINRA Dispute Resolution Services.

FINRA notes the changes are in response to recommendations made last June by Lowenstein Sandler LLP.

The law firm conducted a review of FINRA’s arbitrator selection process after an arbitration decision in favor of Wells Fargo was thrown out. The judge in the case ruled that the wirehouse had manipulated the arbitrator selection process through an agreement with FINRA.

The Lowenstein Sandler review “found no evidence of an improper agreement to remove certain arbitrators from arbitration cases” but recommended that FINRA provide greater transparency to the arbitrator selection process.

Last June, FINRA published a report from the review with several recommendations to provide greater transparency.

FINRA’s proposed changes include clarifying the current practices regarding the selection and removal of arbitrators and conflicts of interest.

Effective Sept. 1, 2022, DRS updated its policy to provide a written explanation whenever a party-initiated challenge to remove an arbitrator is granted or denied, regardless of whether an explanation is requested by either party, according to FINRA.

Melanie Waddell

@Think_MelanieW

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