February 7, 2013
I am an attorney and have spent over twenty years representing investors in NASD and, now, FINRA arbitrations. The make-up of the arbitration panel is crucial to obtaining a fair hearing. Now that all-public panels can be selected, the success rate for investors has improved, somewhat leveling the playing field that is otherwise tilted heavily in favor of the industry. Of course, having an all-public panel is only meaningful in providing an unbiased panel if the arbitrators designated as "public" can fairly be recognized as such.
The proposed Rule change to FINRA Rule 12100 will definitely improve the rule and increase the likelihood that an arbitrator identified as "public" is not really someone with close ties to the industry. Thus, the change to subsection (u)(3) to exclude from the group of possible "public" arbitrators persons associated with mutual funds and hedge funds will eliminate from the "public" arbitrator pool persons that the general public would rightly view as industry persons.
Further, the two year "cooling off" period is an improvement as well. However, I do not believe it goes far enough. An individual who has worked his or her entire professional life for the industry should not be designated as public on his or her two-year anniversary of retirement.
I have reviewed the Comment letter submitted by the Public Investors Arbitration Bar Association (of which I am a member) and join in the comments set forth therein and urge the SEC to pursue and implement the additional changes discussed therein.