February 06, 2017

FINRA Update: Task Force Recommendations and Rule Changes

A summary of the key recommendations to enhance the efficiency, transparency, and fairness of the dispute resolution system

Daniel R. Korb Jr.

December 16, 2016, marked one year since the Financial Industry Regulatory Authority (FINRA) Dispute Resolution Task Force issued its final report and recommendations. Formed in July 2014, the 13-member task force, composed of individuals from the public and industry sectors, was charged with considering possible enhancements to FINRA’s dispute resolution system and making recommendations to improve the process. In June 2015, the task force published an interim summary of key issues, forecasting what was soon to come. The task force reportedly looked at every aspect of FINRA’s dispute resolution forum and ultimately made 51 recommendations for improving the existing system and alerting users of the forum, arbitrators, and the general public to the evolving needs of the dispute resolution process. The task force’s recommendations also in some instances responded to the Dodd-Frank Act’s grant of authority to the Securities and Exchange Commission (SEC) to prohibit or limit the use of arbitration clauses that offend public policy or fail to protect investors. The task force submitted its final report to FINRA’s National Arbitration and Mediation Committee (NAMC) for further review and consideration, and initial actions have commenced.

This article briefly addresses a few of the task force’s key recommendations to enhance the efficiency, transparency, and fairness of the dispute resolution system: arbitrator quality, explained decisions, an “intermediate approach” for small claims, mediation before arbitration, and mandatory arbitration.

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