Another FINRA Arbitration Pilot Program, Another Waste of Time
The folks at FINRA are SOOO predictable. Some arbitration haters come out with a "study" about arbitration and conclude it's not fair. The securities industry releases its own study and says that arbitration is fair. So what does FINRA do? A "pilot" program. See the press release here.
What is the hubbub all about? The eggheads and some members of the plaintiffs' bar believe that the presence of an industry panelist creates a bias against the public claimant. Apparently, these people haven't sat in hearings where I've been. Typically, in cases that I've handled, the industry panelist is the one who is toughest on the securities industry. In a case where my firm represented a public customer, it was the industry arbitrator who was toughest on the opposition's expert.
So does this mean that panels will be free of bias? No. In fact, there is nothing in this program that prevents lawyers who typically represent customers from being on a panel. They are generally qualified as "public" arbitrators. But the program leaves someone like me, who represents brokerage firms and investors, from being on a panel. So now a panel can be dominated by a died-in-the-wool plaintiffs' lawyer with no counterpoint.
This, in my humble opinion, is a mistake. This is another example of addressing a "problem" that does not exist. The bigger problem is arbitrator competence. I once had a case where the chair was an interior designer! She had no business being the chair, but there were no lawyers on the panel, so she got the job. It was ridiculous. The new rules, which require a "qualified" chair, do much to address this situation. But a panel with no industry member? Talk about a stacked deck.
Remember, the industry member is only one of three. If the other two arbitrators are too weak to make up their minds, and the industry member is believed to drive the panel, then that is a problem with the arbitrator pool, not the process. I have always said give me three smart arbitrators and I will get a fair result 99% of the time. On the other hand, if you start tinkering with the process, and remove the industry panelist, I think that this will demonstrate only that FINRA has succumbed to undue political pressure.
That's the view from The Law Planet, Jupiter, Florida.
