Lawyers, Investor Advocates Want to Know More About SEC Supervision Of FINRA’s Arbitrator Selections

The Public Investors Arbitration Bar Association (PIABA) is working with consumer rights group Public Citizen to get the US Securities and Exchange Commission to release documents about its oversight of the Financial Industry Regulatory Authority’s selection of the arbitrators who preside over disputes between broker-dealers and investors. According to PIABA President Jason Doss, because customers are “forced” into only having securities arbitration as a resolution venue when they sign documents to set up brokerage accounts (in the event of future disputes), they should be allowed to know how FINRA decides who hears the arbitration cases.

PIABA is a lawyers’ group that represents investors with securities arbitration claims. Contending that this is an issue of “transparency,” the attorneys have been trying to gain access to these documents for the last few years.

The group’s efforts started in 2010 with a Freedom of Information Act query to the SEC asking for documents that address how the regulator inspects FINRA’s process for selecting arbitrators and looking into their backgrounds. However, even though FOIA grants the public access to federal agency records, it has exemptions. (The exemption exists to protect sensitive matters, such as customer’s private financial data.)

The Commission invoked such an exemption as its reason for turning PIABA’s request. The group made a second attempt to get the documents but this also proved unsuccessful and the lawyers’ group then sued the SEC. They lost their case earlier this year.

Now, Public Citizen’s legal arm has submitted a brief for PIABA in a federal appeals court to overturn the district court’s ruling, which allowed the records to stay undisclosed. (In June, after Reuters reported that a FINRA arbitrator presiding over a securities arbitration case involving Goldman Sachs had been criminally indicted in the past, FINRA modified the way it vets its arbitrators, of which there are about 6,000. Previous to that arbitrators were only vetted once as candidates for the job. Now they must be vetted yearly.)

Still, it will be up to the U.S. Court of Appeals for the District of Columbia Circuit to determine what kind of examination reports are in the exemption that the SEC is claiming. PIABA wants the court to restrict the exemption reports regarding the financial activities of an institution while allowing disclosure of information about FINRA’s administrative duties.

The SSEK Partners Group represents investors with securities arbitration claims against broker-dealers, investment advisers, brokers, hedge fund managers, mutual fund managers, and others. You want to work with an experienced FINRA arbitration lawyer that knows how to pursue your claim.

Our securities law firm knows how upsetting it can be to sustain financial losses caused by professional misconduct or negligence. We are here to help our investor clients recover their investment losses.

Investor advocates push to see trove of arbitration records, MSN, December 5, 2013

Public Investors Arbitration Bar Association

Public Citizen

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