October 20, 2020
The purpose of this letter is to provide the Securities and Exchange Commission with comments on the above referenced proposed rule change which was filed by the Financial Industry Regulatory Authority, Inc. (FINRA) on October 16, 2020.
I am an attorney whose practice is exclusively devoted to the representation of individual and institutional investors in their disputes with the securities industry. Moreover, I am the current Chairman of FINRAs National Arbitration and Mediation Committee (NAMC) and a public member of the NAMC, the former Chairman of FINRAs Discovery Task Force Committee (DTFC), a former member of the Securities Investor Protection Corporation (SIPC) Modernization Task Force and a former President and current Director Emeritus of the Public Investors Arbitration Bar Association (PIABA).
It is my understanding that the proposed amendments would amend both the Code of Arbitration Procedure for Customer Disputes and the Code of Arbitration Procedure for Industry Disputes so as to: (1) increase the additional hearing-day honorarium Chairs receive for each hearing on the merits from $125 to $250 and (2) create a new $125 Chair honorarium for each prehearing conference in which the Chair participates.
It is my further understanding that, under the proposed rule changes, these increases would be funded primarily by minimal increases to the member surcharge and process fees for claims of more than $250,000 or claims for non-monetary or unspecified damages as well as by increased filing fees and hearing session fees for customers, associated persons and members bringing claims of more than $500,000 or claims for non-monetary or unspecified damages.
It is my opinion that the portion of the proposed rule amendments, which would increase the additional hearing-day honorarium that Chairs receive for each hearing on the merits, will provide more of an incentive for eligible arbitrators to become Chairs and would more adequately compensate Chairs for their additional work.
These proposed changes will clearly provide more of an incentive for both new and experienced arbitrators to become Chairs, would increase the number of arbitrators on the Chair roster and will serve to reduce the number of non-local Chair arbitrators – all of which will expand the quality and depth of the arbitrator roster which is a critical component for protecting investors and the public interest.
It is my further opinion that the portion of the proposed rule amendments, which would create a new $125 Chair honorarium for each prehearing conference in which the Chair participates, would finally begin to address the inequity which has resulted from the fact that Chairs do not currently receive an additional honorarium for prehearing conferences, even though Chairs are required to lead the prehearing conferences and perform additional tasks in connection with the prehearings, such as setting discovery, briefing, and motion deadlines, scheduling subsequent hearing sessions, drafting prehearing orders and rendering decisions on discovery and other case-related motions.
These proposed changes would provide this additional compensation to Chairs even if an arbitration case would be settled and/or otherwise resolved before a hearing on the merits is held which, in recent years, has averaged more than 80% of the total number of arbitration cases that have closed each year.
Finally, it is my further opinion that the portion of the proposed rule amendments, which would increase the filing fees and hearing session fees for customers, associated persons and members bringing claims of more than $500,000 or claims for non-monetary or unspecified damages, is a fair, equitable and reasonable allocation of the costs that will be associated with the implementation of the proposed rule amendments.
In summary, these proposed rule changes, which we unanimously approved at our NAMC meeting in June of 2016, would expedite and facilitate the efficiency of the arbitration forum and should be approved by the SEC on an expedited basis.
Thank you for providing me with the opportunity to submit my comments on this rule filing.