FINRA Amends Arbitration Code for Sexual Harassment Disputes

FINRA amended its Code of Arbitration Procedure for Industry Disputes to conform to the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021. The amendments are effective immediately.

The amendments implement changes to FINRA Rule 13201 ("Statutory Employment Discrimination Claims and Disputes Arising Under a Whistleblower Statute that Prohibits the Use of Predispute Arbitration Agreements, Sexual Assault Claims, and Sexual Harassment Claims") and Rule 13803 ("Coordination of Sexual Assault Claims, Sexual Harassment Claims or Statutory Employment Discrimination Claims Filed in Court and in Arbitration"), which (i) permits an individual alleging a sexual assault claim or sexual harassment claim that has agreed to arbitrate before the dispute arose, to elect not to arbitrate the claim post-dispute and (ii) addresses the splitting or "bifurcation" of sexual assault claims and sexual harassment claims from other industry disputes that are required to be arbitrated.

The amendments also make conforming changes to FINRA Rule 2263 ("Arbitration Disclosure to Associated Persons Signing or Acknowledging Form U-4") which requires firms to disclose to all involved parties that an individual alleging sexual assault or harassment may elect not to arbitrate the claim, even if the individual had agreed to arbitrate previously.