SEC Approves FINRA Rule Change Amending Code of Arbitration Procedure (with Lofchie Comment)

The SEC approved a FINRA-proposed rule amending the Code of Arbitration Procedure for Customer Disputes to simplify arbitration panel selection procedures. More significantly, it allows the customer to select a panel that has no members from the financial industry.

Lofchie Comment: Is there evidence that panels from the securities industry are systematically biased against customers, or that panels with industry members are more likely to reach a result that is both unfair to the customer and arguably incorrect? In the absence of such evidence, it is odd to exclude from an arbitration panel the persons who are most likely to have some professional understanding of the securities markets. Is a "better" result really achieved if the arbitrators know less?

See: SEC Order of Approval. See also: FINRA-Proposed Rule Change to Amend Rule 12403 of the Code of Arbitration Procedure for Customer Disputes to Simplify Arbitrator Selection in Cases with Three Arbitrators (June 4, 2013).