The Financial Industry Regulatory Authority (FINRA) hopes to facilitate a faster method for small claim attribution by the launching of a new time-limited hearing over the phone. Those with claims of $50,000 or less may be able to use this expedited method. The move, called the Special Proceeding for Simplified Arbitration, was done after being recommended by the FINRA Dispute Resolution Task Force with the goal of creating an intermediate method for small claims. The plan is not finalized in that the Securities and Exchange Commission (SEC) has yet to receive a formal proposal on the plan.
The task force set out in July of 2014 to create methods that would help to improve the transparency, impartiality and efficiency of the current arbitration forum for all involved. That group had 51 suggestions. Of those, 35 of them have led to some action by FINRA while 16 still remain pending. The organization believes it is moving quickly to implement the recommendations and improve the program, though some don’t agree.
Since this, the SEC has only approved two of the proposals from the task force. Those changes, the approval to add five names to the public arbitration selection list and to increase the number of strikes available, are the only ones to be put into place as of yet. Another change allowed arbitrators to act on a motion to dismiss prior to the case in chief is concluded.
Lack of Movement Frustrates Some
FINRA has yet to act on a number of recommendations. One such area of concern is related to the formation of a special panel that would specifically handle requests for expungement of a brokers’ disciplinary history from databases. The organization says it has agreed, to this point, to notify state securities regulators of such requests. Hugh Berkson, the former Public Investors Arbitration Bar Association (PIABA) president and current lawyer from McCarthy Lebit Crystal & Liffman Co. LPA, isn’t happy with this current situation. He says it is “incredibly frustrating,” and that the organization has simply taken the simplest of options to notify state regulators of such requests.
Another area of key concern is in regards to unpaid arbitration awards. According to a report from PIABA, some $62.1 million in awards has yet to be collected. The task force did take a closer look at steps to minimize this but did not make any recommendation because it could not find a solution. According to reports, FINRA says it will continue to find a solution to this concern and plans to update on the status of such solutions. Berkson says that FINRA should take action to publish statistics on unpaid awards as a step towards this direction. While a complex issue, many suggest the organization take some action towards improving the amount of unpaid awards that occur each year.
Some of the recommendations made by the task force, such as increasing arbitrator compensation, are not likely to be agreed to and will not go into practice.
Hugh Berkson is a Securities Attorney with McCarthy, Lebit, Crystal & Liffman, Co. LPA. Hugh is rated AV® Preeminent™ by Martindale-Hubbell®.
He obtained a business degree in Finance from the University of Texas at Austin in 1989, and is a 1994 graduate of Case Western Reserve University School of Law, where he was a member of the Order of the Barristers and received both the American Jurisprudence Award, (National Mock Trial) in 1993 and the Jonathan M. Ault Mock Trial Prize for 1993-1994.