January 30, 2013
I write to express my support for the approval of SR-FINRA-2013-003, with the concerns raised below. I am the managing partner of Silver Law Group. Several of our lawyers devote their practice to representing investors in FINRA arbitration claims and other forums. I am also the current co-chairman of the securities litigation group of the American Association of Justice.
The role of a public arbitrator is intended to be one of impartiality. The current definition and rules for public arbitrator(s) allow for individuals with significant ties to the financial industry to take that role irrespective of those ties. Accordingly, the spirit of the public arbitrator rule has not always been realized. The current rules do not disqualify individuals from serving as public arbitrators that may be tainted with industry rooted predispositions attained through their employment in the financial services industry.
The proposed rule change seeks to remedy at least part of this problem by disallowing individuals associated with hedge funds and mutual funds from serving as public arbitrators for at least two years after their disassociation. Although the proposed rule does not completely remedy the problem of public arbitrators not truly being Public, it is a step in the right direction, to attain a more equitable arbitration process.
I believe the proposed revision to the FINRA code of Arbitration Procedure, which would impose a two year ban on industry related individuals who could be considered for classification as public arbitrators, should be strengthened by requiring a minimum of five (5) years before the individual could be considered for classification as a public arbitrator. Even five years would be a compromise, because public arbitrators should not ever be former industry participants.
Thank you for the opportunity to comment on this proposed rule change.
Scott L. Silver, Esq.
Silver Law Group