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Just Under The Wire, SEC Approves FINRA’S Arbitrator Classification Rule Proposal, Saying “We Really Will Have Enough Arbitrators.”
Posted on Categories FINRA Code of Arbitration, News, RulemakingTags , ,

With time running out, and just as we went to press, the SEC approved FINRA’s controversial and long-pending rule proposal to overhaul its Arbitrator Roster.

We have covered many, many times SR-FINRA-2014-028 (see, e.g., SAAs 2014-45, -28, -24 and -23). As described on the FINRA Website, “the amendments would, among other matters, provide that persons who worked in the financial industry for any duration during their careers would always be classified as Non-Public Arbitrators, and persons who represent investors or the financial industry as a significant part of their business would also be classified as non-public, but could become Public Arbitrators after a cooling-off period. The amendments would reorganize the definitions to make it easier for Arbitrator applicants and parties, among others, to determine the correct Arbitrator classification.”

There were several rounds of comments along the way. The February 26th Approval Order (Release No. 34-74383), which runs 43 pages, closes by stating: “In sum, the Commission believes that FINRA gave due consideration to the proposal and met the requirements of the Exchange Act. However, the Commission will be interested in the results of FINRA’s future cost-benefit analysis and the staff will monitor the consequences of approval of the proposed rule change.” Contacted for a comment on the rule approval, SAC Board member George Friedman (who commented during the proposal phase) added these thoughts: “I sure hope FINRA and the SEC are right, and that time proves my concerns about this rule change were unfounded. Time will tell. I've marked my calendar for that cost-benefit analysis. ” He also quipped: “Lots of work ahead for VP Barbara Brady and her Neutral Roster Department implementing this rule change!”

(ed: FINRA has 60 days to issue a Regulatory Notice that will set the effective date for 30 days thereafter.) (SAC Ref. No. 2015-08-01)

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