Arbitrators May Soon Be Able to Request Enforcement Mid-Case

Mar 28, 2014

The Financial Industry Regulatory Authority (FINRA) has proposed a new rule in which arbitrators can refer a case for disciplinary action before it’s over. Currently, arbitrators have to wait until a case is completely closed to report concerns to FINRA’s Department of Enforcement. FINRA believes that arbitrators should take action as quickly as possible so the Department of Enforcement can uncover any threats to investors. FINRA is also concerned about evidence collection- they want to be able to collect all the evidence to prove or disprove the allegations of wrongdoing before it could possibly disappear.

This isn’t the first time that FINRA has moved to propose such a rule. On two previous occasions, FINRA proposed this rule and subsequently withdrew the proposal as a result of significant opposition. The main concern of those in opposition is that if an arbitrator reports his or her concerns in the middle of the evidentiary hearing it could improperly prejudice his or her co- arbitrators or delay the proceeding. FINRA believes the new proposed rule will reduce the potential for disruption to the case.

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