In October, FIN RA proposed to the SEC that all investors making arbitration claims have the right to request an “all-public” arbitration panel. If the SEC approves this proposal, it would make permanent and extend to all investors a temporary pilot program under which some investors have had the option of replacing the customary “non-public” (i.e., industry-affiliated) arbitrator with a public arbitrator.
According to FIN RA, approximately threequarters of investors in the pilot program opted for an all-public panel, and such panels ruled in favor of the investor substantially more often than panels that included an industry arbitrator.
This change may reduce the likelihood that the SEC will altogether prohibit mandatory arbitration provisions in customer agreements. The Dodd-Frank Act grants the SEC clear authority to take such action with respect to broker-dealers and investment advisers. DFA also directs the new Bureau of Consumer Financial Protection to study the use of pre-dispute mandatory arbitration agreements by firms under its jurisdiction and empowers the Bureau to take appropriate action in this area. Moreover, DFA generally directs the SEC and the Bureau to coordinate their positions and strive for consistency on matters of this type.