Complaints about FINRA’s arbitration program are common, and a recent case has provided ammunition to the critics.

To set the stage, remember that FINRA arbitration is mandatory in customer complaints against brokers; in order to be eligible, an arbitrator generally must be on FINRA’s approved list; and FINRA receives its revenue from its members, including large Wall Street firms.

The case in question involved a complaint against Merrill Lynch, alleging that its registered representative failed to adequately monitor two customers’ accounts. Three FINRA-approved arbitrators ruled in favor of the customers, awarding $520,000 in damages.

Over the next several months, however, FINRA notified each of the three arbitrators of their removal from FINRA’s roster of approved arbitrators. The arbitrators, two of whom had many years’ experience, objected to their removal and one filed a whistleblower complaint with the SEC. After the firing was made public, FINRA reinstated all three.

FINRA denies that it removed these arbitrators because of any pressure from Merrill Lynch or the size of the award.