The U.S. Financial Industry Regulatory Authority is seeking to allow investors using its arbitration system to choose all-public panels.

FINRA will file a rule proposal next month with the U.S. Securities and Exchange Commission that would expand to a two-year-old pilot program that gives investors filing an arbitration claim the option of choosing an all-public panel, the U.S. regulator said Tuesday.

The current pilot program involves 14 firms that agreed voluntarily to a set number of investor cases that did not involve individual brokers. Since the program began in October 2008, slightly more than 60% of eligible investors have opted in, and about half of those have chosen all-public panels, FINRA said. The pilot program was originally set to end next month, however the participating firms have agreed to extend it for a year while the rule making process is underway.

If approved by the SEC, the proposal would give investors the option of choosing an arbitration panel that has two public arbitrators and one industry arbitrator, as is now the case, or choosing to have their case heard by an all-public panel. The proposed rule would apply to all investor disputes against any firm and any individual broker. It would not apply to arbitration disputes involving only industry parties.

“Giving each individual investor the option of an all-public panel will enhance confidence in and increase the perception of fairness in the FINRA arbitration process,” said Richard Ketchum, FINRA chairman and CEO. “All investors will have greater freedom in choosing arbitration panels, and any investor will have the power to have his or her case heard by a panel with no industry participants.”

In Canada, the Investment Industry Regulatory Organization of Canada is also seeking to upgrade its arbitration program. It recently released rule proposals to raise the limit on claims from US$100,000 to US$500,000.

IE