FINRA Responds to PIABA’s Arbitrator Report

By Patricia Uceda, Fall 2014 Graduate Research Assistant

judgeAs we noted earlier this week, PIABA recently issued a report arguing that the FINRA arbitrator pool lacked diversity and did not effectively communicate potential biases to investors. FINRA has issued a statement in response, disagreeing with PIABA’s report.

FINRA emphasized that its dispute resolution forum is a fair, efficient, and cost-effective system for resolving disputes between investors and broker firms. FINRA states that it has an aggressive recruitment campaign in place designed to seek individuals from diverse backgrounds. FINRA’s recruiting initiatives target more than 100 organizations nationwide, including the American Association of Individual Investors, American Business Women Association, American Bar Association, State Bars, and the National Society for Hispanic Professionals.

FINRA dismissed PIABA’s claims that the decreasing win rates were due to lack of arbitrator diversity, stating that win rates depended solely on the controversy involved, market events, and counsel. FINRA also pointed out that it was logical for most arbitrators to be older because the reason that many of them are able to make this time commitment on an ongoing basis is because they are retired.

Lastly, FINRA pointed out that they formed an Arbitrator Task Force in July made up of a significant number of PIABA members to discuss possible enhancements to the forum.

FINRA concluded by stating that they would continue to welcome all input that is substantive and contributes to further enhancing the forum.