February 7, 2013
I am an attorney, FINRA chair-qualified arbitrator, member of the National Arbitration and Mediation Committee, and chair of its Rules and Procedures Subcommittee. I write to urge the Commission to support the proposed change in the categorization of certain arbitrators in FINRA 2013-003. The Supreme Court's decision in McMahon v. Shearson approved mandatory arbitration clauses because of the Court's faith that the SEC would ensure through its rule-making authority that an industry-sponsored forum would remain fair to aggrieved investors. For that process to be fair, the rules need to ensure that persons with connections to the industry be classified as industry (non-public) arbitrators. Hedge fund and mutual fund employees certainly have connections with the industry, and should never have been classified as public arbitrators. The proposal is a step in the right direction. Because of their industry connections, hedge fund and mutual fund employees should never be classified as public arbitrators, and so I also urge the Commission to reject that portion of the proposal that would return them to the public pool after a mere two years. Under the proposal, an individual who spent an entire career in the industry as a mutual fund compliance officer would be classified as a public arbitrator two years after retirement. That is wrong, and is anti-investor. The two-year look-back provision should be stricken from the rule. Thank you for your consideration.