November 24, 2010
Dear Securities and Exchange Commission:
I am writing this letter in support of the proposed rule change. I am an attorney who represents customers in FINRA arbitration matters, for over 20 years.
This rule change must be implemented, not only to reassure the public that binding arbitration is a fair tribunal, but also to insure that justice is carried out in a fair and impartial manner. Arbitration panels have 3 arbitrators that must work closely together. Having 1/3 of the panel already aligned with the industry adds a layer of protection to the industry that is not found in court or jury trial proceedings. Investors should be judged by their peers, not by a member of the same industry that they are suing. It creates not only an appearance of bias, it is actual bias.
In cases in which an expert witness is retained to aid the triers of fact (the arbitration panel) as to whether the broker and brokerage house fell below the standard of care, having an industry arbitrator means there is already someone who is unfairly applying his/her own industry standards to the case he is now judging. This, again is an unfair bias placed upon the proceeding.
Finally, as to the notion that an industry arbitrator is in fact tougher on the industry, while it sounds interesting, it just isn't how it works. But even assuming, arguendo, it is true, this current rule change would allow a party the option of keeping an industry arbitrator in the case.
I support these proposed rules, and thank you for the opportunity to comment on a very important arbitration rule change.
Mitchell S. Ostwald