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Thirty (30) Ways or More for Party Counsel to Change the FINRA Code
Posted on Categories Arbitration, Arbitrators, FINRA Code of ArbitrationTags , ,

With the statutory emphasis placed on specific procedures for SRO rulemaking -- and with FINRA's seemingly continuous flow of rule changes, amendments, and interpretations, one tends to forget that many, if not most, of the provisions in FINRA's Arbitration Code, are default provisions -- there if the parties need them. If the parties want to agree otherwise, those provisions will generally give way to the parties' desire to control their own process. Human nature being what it is, though, disputing parties entering arbitration are in no mood to agree.

If parties had to arbitrate and agree on all the procedures that would govern that arbitration, the case would never get decided. That's why forums develop their own rules. At base, though, arbitration is a consensual process. Indeed, the arbitrators can go no further in exercising power over the parties than they have allowed in contracting for arbitration. Parties are protected by statute, in that regard, as Section 10(a)(4) of the Federal Arbitration Act forbids arbitrators from "exceed[ing] their powers." Those "powers" are not set by statute. They are established by contract, either before the dispute arose or by post-dispute agreement.

FINRA recognizes this party power to alter the process right in the very front of its Customer and Industry Codes (FINRA's Mediation Code is entirely based upon party consent), when it asks them in highlighted type which version of the Code should be applied to their dispute (See Series 12000 Proviso). That invitation to "agree otherwise" continues throughout the Code, appearing in more than two dozen places as one progresses through the Code's many provisions.

The attached resource sheet points out the various places within the FINRA Customer Code where parties have the specific option to change the governing procedures, usually by the process of mutual agreement. SAC readers know of these options and other options for controlling the procedures that best suit the resolution of a particular dispute through a recent article in SAC, Vol. 2017, No. 8, p. 1, "FINRA's Customer Arb Code: Finding Mutual Agreement Means Not Having to Play by the Rules," and in an earlier article (discussed in the resource sheet) directed specifically at the most significant of party powers, the right to choose one's own arbitrators. By distributing the earlier article and the resource sheet, highlighting the FINRA Code provisions, we aim to open as widely as we can the conversation on mutual agreement.

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