The past week, the Financial Industry Regulatory Authority (FINRA) announced two noteworthy developments: first, FINRA plans to increase arbitration panel lists; and second, it will assume market surveillance and enforcement functions that are now performed by NYSE Regulation.
Arbitration Lists
In the area of arbitration, FINRA had previously filed a proposed rule change with the Securities and Exchange Commission to amend Rules 12403 and 12404 of the Customer Code of Arbitration Procedure and Rules 13403 and 13404 of the Industry Code of Arbitration Procedure.
This rule change is intended to increase the number of arbitrators on the Neutral List Selection System. Specifically, parties picking an arbitration panel will select from a list of 10, rather than eight for every category of arbitrator on three-member panels, including public chair-qualified, public and non-public.
In cases involving less than $100,000, heard by a single, chair-qualified public arbitrator the list will also be increased to 10 names from the current eight.
The stated goal and expected outcome, is to make it more likely that the parties will have their cases heard by arbitrators they have selected. According to Linda Fienberg, President of FINRA Dispute Resolution, the larger pool will enable parties "to present cases before arbitrators they helped choose" instead of those generated by computer selection.
This proposed change does not alter the number of strikes allowed per party, which is currently set at four. This means that if approved by the SEC, it will be more likely that the parties end up with arbitration panelists they have selected and ranked as opposed to those generated by extended list appointments when the parties cannot agree.
NYSE Regulation
The other announcement from FINRA noted above, is that it will take over market surveillance and enforcement functions that are currently conducted by NYSE Regulation. This Securities and Exchange Commission will review this proposal.
The general agreement provides that FINRA would assume regulatory functions for NYSE Euronext's U.S. equities and options markets - including the New York Stock Exchange, NYSE Arca and NYSE Amex. The anticipated effective date is late June.
The goal in this move is to consolidate surveillance and enforcement responsibilities and aggregate these functions "with those already performed by FINRA for other markets" for a "consistent and completely integrated approach to regulation," according to NYSE Euronext COO, Lawrence Leibowitz.
And in the words of FINRA Chairman and Chief Executive Officer, Richard Ketchum, "...[t]his unified view will better enable regulators to detect problematic activity across multiple markets and financial products, and ensures that audit trail data needed for effective regulation is complete, consistently presented and transparent."
Contact Wall Street's Gusrae Kaplan Nusbaum PLLC, for information and representation in regulatory and enforcement proceedings, as well as securities and commodities litigation and other related areas.
