FINRA has proposed new arbitration rules that would give investors the option of selecting all-public arbitration panels without an industry representative. Use of all-public panels excluding industry insiders is meant to bolster public confidence in the arbitration process. But the absence of financial professionals on the arbitration panels will undoubtedly disadvantage the financial institutions and professionals involved in many cases.
Although an outright prohibition of mandatory arbitration clauses would hurt financial services firms and their employees by allowing some consumers to take the expensive litigation route, the proposed FINRA rules may counteract any migration away from arbitration by motivating some investors who are leery of arbitration panels that include an industry representative to utilize public-only arbitration, keeping those cases out of court.
AdvisorFX Advisor’s Journal will keep you updated on the development of both the FINRA arbitration proposal and SEC action on mandatory arbitration clauses. Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of securities arbitration in Advisor’s Journal, see Mandatory Securities Arbitration Clauses on the Chopping Block (CC 10-48).
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