In Regulatory Notice 09-13 issued this week by FINRA, the regulator announced changes to the arbitration code of procedure relating to the number of arbitrator panels for certain cases.
Pursuant to changes to Rule 12401 and 13401, arbitration claims for less than $100,00 will be heard by a single chair-qualified arbitrator, unless all parties agree in writing that the matter should be heard by a 3-person panel. This change becomes effective March 30, 2009, for all cases filed on or after that date.
Currently, arbitration claims seeking damages of between $25,000 and $50,000 are heard by a sole arbitrator, unless a party asks for a panel of three. With the changes, the claims threshold is raised from $50,000 to $100,000, and it requires consent of all the parties to have a 3-person panel.
What does this mean for investors? If your case seeks damages falling within this range, you'll likely only get one person as a judge (arbitrator) instead of three. If that one person is a good arbitrator, that may be a good thing. But if not, it may be disastrous for your case. If a case is to be decided by a sole arbitrator that person will be a public arbitrator (not from the industry roster (3-person panels are two public and one industry), and will also be qualified to serve as chair of a 3-person panel.
There appears to be an exception in the revised rules: if the claim seeks unspecified damages, a 3-person panel will be appointed.
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