This post explains how the arbitration panel is selected in three-arbitrator cases, consisting of intra-industry claims, being arbitrated before the Financial Industry Regulatory Authority, Inc. (“FINRA”). More specifically, this post addresses how the arbitration panel is appointed in intra-industry claims between a member firm (the broker-dealer) and an associated person (the individual). Such intra-industry disputes relate to the individual’s employment or former employment with the broker-dealer.
In brief, FINRA provides the broker-dealer and the individual employee with lists of potential panelists, and each the broker-dealer and the individual employee may exercise a certain number of peremptory strikes. The broker-dealer and the individual each rank numerically, in order of preference, the arbitrators whom they did not strike. FINRA combines the parties’ rankings and, in combined rank order, asks the arbitrators to serve on the arbitration panel.
In brief, the broker-dealer and the individual employee may decide which of the listed arbitrators to strike, and the order in which to rate the remaining arbitrators, by, among other methods, discussing the arbitrators with knowledgeable counsel, reviewing the arbitrators’ work histories, and/or analyzing the arbitration awards handed down by panels on which each of the arbitrators served.
If the amount of a claim is more than $100,000, exclusive of interest and expenses, or is unspecified, or if the claim does not request money damages, the arbitration panel will consist of three arbitrators, unless the parties agree in writing to one arbitrator. In these cases, FINRA will send the following lists to the broker-dealer and the individual, depending on the type of claim.
Regardless of the type of employment claim, the broker-dealer and the individual each may numerically rank the remaining arbitrators on each list. “1” indicates a party’s most preferred arbitrator. FINRA consolidates the parties’ rankings and, in consolidated rank order, contacts arbitrators on each list for appointment to the arbitration panel.
There are at least three methods by which, or by a combination of which, the broker-dealer and the individual may decide which arbitrators to strike from the lists, and in what order numerically to rank the remaining arbitrators on each list. These three methods are as follows:
It should be noted that this post does not address how the arbitration panel is selected in cases involving statutory employment discrimination claims. A separate FINRA Rule, not discussed here, governs statutory employment discrimination claims.
The Law Offices of David S. Rich, LLC arbitrates business, employment, and securities matters before FINRA and other arbitral bodies in Manhattan, NY and New Jersey.
David S. Rich is the founding member of the Law Offices of David S. Rich, LLC,
a Manhattan Employment and Business Litigation Law Firm, in New
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