(Corrects eighth paragraph regarding the definition of lawyers
as non-public or public arbitrators)
By Suzanne Barlyn
June 11 Wall Street's self-regulator will ask
the U.S. Securities and Exchange Commission next week to review
a plan that would restrict industry veterans from acting as
arbitrators in many disputes between investors and their
brokerages, an official said on Wednesday.
The change would tighten limits on who is eligible to serve
as public arbitrators, said Linda Fienberg, head of the
Financial Industry Regulatory Authority's arbitration unit, at a
Critics of the plan have said it is unfair to deem
arbitrators with only a few years of experience as having
industry ties and that doing so will reduce the number of
FINRA's board approved the plan in February. [ID:
The SEC, however, which oversees FINRA, must review and
approve the plan for the change to become effective.
The Wall Street watchdog allows people who have been out of
the industry for at least five years - but who may have worked
in it as many as 20 years - to hear cases as public arbitrators.
Under the new plan, any arbitrator who has had any industry
experience, even for brief periods, would not be eligible to
serve as a public arbitrator.
Lawyers who worked on behalf of brokerages or investors for
more than 20 percent of their time would also be deemed
"non-public arbitrators." They could later become public
arbitrators if they met certain conditions, including a hiatus
from practice, according to a FINRA spokeswoman on Wednesday.
Investor advocates have long pushed for the plan. If
approved, the change would mean that investors could opt to have
their cases heard by a panel of three so-called public
arbitrators who would not include people who had any past
Arbitrators who have any industry experience at all could
show bias in favor the industry or at least make the process
appear as being unfair to investors, they say.
The SEC will request written comment from the public after
it receives the plan and consider those views before deciding
whether to grant approval.
(Reporting by Suzanne Barlyn; Editing by Dan Grebler)