November 15, 2010
Thank you for the opportunity to comment on these proposed rules. I am an attorney who regularly represents customers in FINRA arbitration. I support the proposed rule change.
Allowing the public customers to choose an all-public arbitration panel is long overdue. Customers should not be forced to have one-third of their panel comprised of at least one person associated with the securities industry. It would be the equivalent of asking a medical malpractice plaintiff to have four doctors on a twelve-person jury.
There simply is an inherent bias with a person who works in the securities industry to decide a case involving another securities firm or representative. The proposed rule would help reduce this bias.
Moreover, this rule provides the customer claimant with more choice. If the customer or his/her attorney indeed feels that he/she would like an industry arbitrator, this proposed rule allows the customer to either use the current ranking system, or the customer still has the ability to rank industry arbitrators. Providing aggrieved investors with this choice is a step in the right direction of making mandatory arbitration more fair.
Those in favor of having an industry arbitrator argue that the industry arbitrator is needed to provide expertise and industry insight to the public arbitrators. However, this is unnecessary in many circumstances, since the parties typically use expert witnesses to opine on the appropriateness of the conduct at issue. The expert witnesses are able to provide this insight to the public arbitrators when necessary.
Another argument for requiring an industry arbitrator on each 3-person panel is that industry arbitrators are (sometimes) harsher on those firms or representatives that wrong their customers and punish them accordingly. However, if that is indeed true, the customer still has the option to rank the industry arbitrators.
In sum, I support these proposed rules, and I again want to thank you for the opportunity to comment on this important issue.
Sincerely,
David Neuman