Who are the Arbitrators?
You could maybe be an arbitrator. FINRA has more than 7,200 arbitrators on its roster and is attempting to expand the depth and diversity of the roster by recruiting candidates to serve from a variety of cultural backgrounds and areas of professional expertise, such as business, account, finance, library sciences, liberal arts, legal, and more. An arbitrator does not need to have arbitration or securities-related experience, although many do. Arbitrators are not employed by FINRA. You only need at least five years of paid business and/or professional experience—inside or outside of the securities industry—and at least two years of college-level credits. Sign up by clicking this link: https://www.finra.org/arbitration-and-mediation/apply-now The reality is that the majority of the FINRA arbitrator roster is comprised of older white men, many who have served on dozens of arbitration panels and are jaded and anesthetized to seeing brokerage firm wrongdoing. The more the FINRA arbitrator roster pool can be enlarged to include younger people, women, minorities and folks from all walks of professional life, the better.
As of 2011, investors can now choose to have an all public panel. This is a fabulous victory for investors, because prior to that, there was always an industry arbitrator on every panel. An industry arbitrator is someone tied to the brokerage industry. An all-public panel means that the arbitrators are neither associated with nor employed by a broker/dealer or securities industry organization.
Once a securities arbitration claim is filed, the parties go through a process whereby they select the arbitrators to preside over the case. FINRA sends each party a list of some 30 arbitrators, along with their background and all of their prior arbitration awards. One of the most time-consuming aspects of handling a securities arbitration case is vetting the arbitrators. It is necessary to not only review the arbitrators’ prior awards but to also contact lawyers who have recently appeared before the arbitrators. Great insight can be gleaned by other lawyer’s perceptions and experience with a particular arbitrator. The parties are given a certain number of strikes, meaning that they can exclude or X out an arbitrator for any reason. They then rank the remaining arbitrators. The system is designed such that a three-member panel should be able to be constituted from the parties’ respective rankings. The parties do not share their rankings with each other; they are sent to FINRA and three arbitrators are chosen based on the parties’ rankings. One of the arbitrators will be the Chairman.
Occasionally, events occur that require the removal of an arbitrator. I represented a client in an arbitration in Dallas, Texas many years ago where one of the arbitrators kept evidencing his brokerage industry bias through questions to my expert witness. It got so bad that I requested the arbitrator withdraw himself and that the hearing be adjourned until a replacement arbitrator could be appointed. The arbitrator refused and so I asked the other panel members to give their input. After consulting, they came back and said that they agreed that the arbitrator should recuse himself. Upon hearing this, the other arbitrator reluctantly agreed to recuse himself.
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