In December 2015, a FINRA Dispute Resolution Task Force issued its Final Report and Recommendations for improvements to the administration of its forum and its ADR processes.  (See my earlier blog post about it here.  The Report contained 51 separate recommendations.

Earlier this month, FINRA posted a draft Status Report detailing the progress FINRA has made on implementing or otherwise responding to the Task Force’s recommendations as of September 30, 2016.  (Since the Securities and Exchange Commission oversees and monitors FINRA, including its Dispute Resolution office, the SEC must approve any change to its arbitration or mediation codes.

The Status Report shows that, in just nine months:

  • The FINRA Board of Governors approved five rule-change proposals — all relating to arbitration — for filing with the SEC.  One of those proposals (relating to tweaking the arbitrator selection process to increase party choice) has already been approved by the SEC; a second (relating to adding a ground to allowable motions to dismiss) has been filed.  Presumably the other three will be filed shortly.
  • FINRA DR has implemented 17 other recommendations that did not require rulemaking.  FINRA classifies these changes as in the areas of “forum transparency, arbitrator recruitment and training, and case administration processes.”

I commend FINRA DR for moving so rapidly on implementing the Task Force’s recommendations.  For a regulator to be able to cut through the “red tape” inherent in any bureaucracy — here a securities self-regulatory organization with many differing constituencies to which it is accountable — is a testament to the fluidity, efficiency and efficacy of the organization.   It is also a model for how a regulated ADR administrator can constantly improve its processes and procedures to serve the disputants – the constituency with, at least theoretically, the right to control the arbitration and mediation rules.

Jill Gross is a Professor of Law and the Director of the Investor Rights Clinic at Pace Law. She teaches the Investor Rights Clinic and Seminar, Mediation and Arbitration, Professional Responsibility, and Securities Litigation and Enforcement. She has published numerous law review articles in the area of dispute resolution and investor justice, and has been quoted in the national media on issues relating to securities arbitration. She is also a contributor to ADR Prof Blog.