July 23, 2014
I am a shareholder of the law firm McCausland Keen Buckman. Much of my practice has been devoted to the representation of individuals and institutions in disputes with the securities and financial service industries. Currently, I am a member of the board of directors of the Public Investors Arbitration Bar Association and FINRA's National Arbitration and Mediation Committee.
The purpose of this letter is to provide the Securities and Exchange Commission with comments on the above referenced proposed rule change, which I enthusiastically support.
Invariably, by agreement, customers of FINRA member broker-dealers are compelled to arbitrate any future claim they may have against the firms. FINRA regulates its members, and provides, through FINRA Dispute Resolution, the forum to arbitrate these claims. Because arbitration of customer claims is mandatory, it is of paramount importance that FINRA arbitration be perceived by the public to be fair and impartial.
FINRA arbitrators are divided into two classes: public and non-public. Under the Customer Code, cases involving claims exceeding $100,000 are arbitrated before a panel of three arbitrators. These arbitrators are selected from three lists: a chair qualified list, a public list and a non-public list. The proposed rule change includes within the definition of non-public arbitrators 1) persons associated with investment advisers, mutual funds and hedge funds, who are currently precluded from serving as FINRA arbitrators and 2) professionals, such as attorneys, accountants and expert witnesses, who devote a substantial portion of their practice to representing parties in disputes concerning investment accounts or transactions or employment relationships within the financial industry, without regard to whether these professionals represent customers or the industry. The proposal also importantly establishes a bright line test precluding persons who formerly worked in the securities industry from serving as public arbitrators.
The proposed rule broadens the pool of qualified arbitrators, enhances the perception of neutrality and fairness of the FINRA arbitration forum, and includes, in the non-public pool, candidates of diverse backgrounds worthy of careful consideration in the arbitrator selection process.
For the foregoing reasons, I strongly recommend that the Commission approve the proposed rule change on an expedited basis. Thank you for the opportunity to comment on this rule filing.