FINRA requests comment on arbitration proposals

Written on Nov 01, 2017

The Financial Industry Regulatory Authority (FINRA) has issued two Regulatory Notices requesting comment on two proposals related to its arbitration program: a proposal to expand the options available to investors when filing a claim in arbitration against an inactive firm or associated person, and a second proposal related to compensated non-attorney representatives that provide public investors an alternative to representation by attorneys in disputes between investors and broker-dealers.

FINRA is proposing to expand the options available to customers in situations where a firm or associated person is no longer in business either at the time the claim is filed or during a pending arbitration. Regulatory Notice 17-33 proposes amendments to FINRA’s arbitration rules to allow customers to withdraw an arbitration claim, amend pleadings, postpone hearings, and receive a refund of filing fees under these situations.

Similar to the current rules and procedures relating to claims filed against firms no longer in business, the proposed amendments would allow customers to evaluate the likelihood of collecting on an award and make an informed decision about whether to proceed in arbitration, to file the claim in court or to amend his or her claim to add other respondents from whom the customer may be able to collect should the claim go to award.

FINRA is also conducting a review of the efficacy of continuing to allow compensated non-attorney representatives (NAR firms) to represent customers in arbitration. The Dispute Resolution Task Force in its Final Report and Recommendations recommended that FINRA conduct a study to determine, among other matters, whether NAR firms are performing competently. Regulatory Notice 17-34 seeks responses to questions related to forum users’ experiences with NAR firms.

The comment period for both notices ends Dec. 18.

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