Series 7: 18.4.2.1 Code Of Arbitration

18.4.2.1  Code of Arbitration

FINRA Dispute Resolution Inc. is an independent FINRA subsidiary that handles industry disputes. It recommends rules and procedures relating to arbitration and mediation, it establishes and maintains a roster of potential arbitrators, and it performs the administrative functions related to arbitration.

Arbitration of disputes among industry members is mandatory. However, arbitration of disputes with customers is mandatory only when requested by a customer or required by contract. Member firms or associated persons cannot unilaterally demand arbitration of a customer, but must have the customer’s written agreement. For all parties, there is a statute of limitations. Claims are no longer eligible for arbitration once six years have elapsed after the disputed event.

Pool of arbitrators. Arbitrators are selected from a roster of neutral persons, at least half of whom must be from outside the industry. FINRA classifies these as public arbitrators. A public arbitrator is one who has no present association with the industry and has not been employed in the industry for at least the past twenty years. A nonpublic arbitrator is a person who is employed in the securities industry or has been so employed within the past five years.

Arbitration process. Initial statements of claim must be filed in an Arbitration Submission Agreement to the Direct