News & Insights

Sec Approves Finra’s Proposed Rule Change To Expedite The Arbitrator List Selection

The SEC approved a proposed rule change to amend FINRA Rules 12402 and 12403 of the Customer Code and Rule 13403 of the Industry Code to allow the Director of FINRA’s Office of Dispute Resolution (“Director”) to send the list generated by the Neutral List Selection System to all parties at the same time, within 30 days after the last answer is due.  The list will now be sent within this time, regardless of whether the parties agree to extend any answer due date.

Prior to the change, the Rules stated the Director would wait until after the last answer was due to send the list of arbitrators to the parties.  If there are multiple respondents to an arbitration and they are added at different times, each respondent would have a different answer due date, thereby delaying when the list was sent out to the parties.  Likewise, if the parties had agreed to extend the deadline for when the answer was due, the Director would use the new date as the last answer due date for sending the list.

The former Rules would often delay arbitrations longer than intended by FINRA.  FINRA proposed the amendment in an effort to appoint arbitrators earlier and schedule earlier initial pre-hearing conferences.  The SEC agreed with FINRA finding that the proposal will help protect investors and the public interest by streamlining the arbitration process by concluding the arbitrator selection process at an earlier date.

Our clients should be aware that this change in FINRA Rules could result in selection of arbitrators before a respondent even files its answer, especially if claimant provides an extension to the answer deadline.  The list selection is due by the parties within 20 days of receipt; however, there is currently nothing in the FINRA Rules that would prevent the parties from agreeing to extend this time frame if necessary.