NASAA Raps FINRA Pilot Program

Washington — North American Securities Administrators Association (NASAA) President and North Dakota Securities Commissioner Karen Tyler is voicing concern about a Financial Industry Regulatory Authority (FINRA) pilot program.

The pilot allows certain investors making arbitration claims to choose a panel made up of three public arbitrators instead of the current system, which requires the inclusion of a mandatory industry representative on arbitration panels.

“The first step toward improving the integrity of the arbitration system must be the removal of the mandatory industry arbitrator coupled with a prohibition on ties to the industry on the part of the public arbitrator,” Tyler says. “FINRA’s pilot program, while a positive step, does not go far enough toward resolving immediate investor harm.”

Tyler says that because the arbitration system has evolved into a mandatory condition imposed by the industry, it is imperative that the system of dispute resolution be fair, transparent and free from bias.

“Even without this pilot, we would hope that FINRA would agree that the immediate removal of the mandatory industry arbitrator is a critical step toward restoring investor confidence in the fairness of the securities arbitration process,” she says.

Source: North American Securities Administrators Association