Close Menu

FINRA Update: Securities Arbitrator Pay Going Up; Confidential Investor Information to be Redacted; and Senators Push for Tighter Expungement Guidelines for Brokers

The FINRA Board of Governors (“Board”) recently met to discuss revisions to several of its rules governing securities arbitrations between investors, brokerage firms, and brokers. The Board has authorized FINRA to file a number of proposed amendments to the FINRA Code of Arbitration Procedure for Customer Disputes with the Securities and Exchange Commission (“SEC”).

The proposed rulemaking items approved by the Board include an increase in the honorarium paid to each arbitrator selected by the parties to serve on an arbitration case. The revised rule would apply to cases involving public customers, to intra-industry disputes between FINRA member firms concerning the departure of brokers, and to employment disputes between brokers and their employing member firms.

Currently, arbitrators serving on an arbitration case are paid $200 for each hearing session lasting four hours or less. The chairperson of the arbitration panel receives an additional $75 per day. The proposal approved by the Board would increase the per session arbitrator honorarium to $300 for each hearing session lasting four hours or less. In addition, the additional chairperson honorarium would increase from $75 to $125 per day. FINRA noted that it has not increased the amount of the honoraria for arbitrators since 1999.

In order to fund the honoraria increases, the Board approved increases in member fees for cases seeking damage over $250,000. Claim filing fees for cases with damages of more than $500,000 would also be increased for investors, brokerage firms, and brokers who bring the cases. In addition, the fees charged for each hearing session conducted in cases larger than $500,000 would also be raised from the current rate of $1,200. The Board did not specify the amount of the fee increases in the notice.

Another of the rule revisions approved by the Board involves the redaction of personal investor information from any documents filed with FINRA. If approved, parties filing documents with FINRA in an arbitration case would be required to first redact all but the last four digits of personal customer information, such as Social Security numbers and financial account numbers.

Another item up for consideration by FINRA concerns the expungement of customer arbitration matters from brokers BrokerCheck reports. A bipartisan pair of U.S. Senators – Jack Reed (D-R.I.) and Chuck Grassley (R-Iowa) – is pushing FINRA to respond to criticisms of FINRA’s current expungement procedures which allow brokers to remove references to customer arbitrations from their BrokerCheck reports in certain circumstances.

Recently, the Public Investors Arbitration Bar Association (“PIABA”) published a report indicating that FINRA arbitrators approved the expungement of brokers’ records 90% of the time. PIABA made several recommendations to FINRA including banning settlement agreements that contain a requirement that investors agree not to oppose expungement requests. The senators have asked FINRA to respond to PIABA’s suggestions by January 6.

Facebook Twitter LinkedIn Google Plus