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FINRA Arbitration – Beware the Chair

Joshua Iacuone

FINRA arbitrations are decided by a Panel of three arbitrators, one of whom is the Chair.  The Chair is more than just 1/3 of a FINRA litigant’s judge, jury, and executioner.  The Chair has an outsized role, authority, and gravitas with the other two panelists.

To serve as the Chair for a FINRA arbitration, an arbitrator must have completed all the required Chair training and served on a Panel through Final Award on at least three occasions (one if the arbitrator has a law degree). See FINRA Rule 12400 & 13400.  This not only represents institutional knowledge, it means the Chair has the “stamp of authority” to the parties and other arbitrators, who typically have less experience in FINRA arbitrations.

In IMcP’s FINRA and Financial Advisor lawyers’ experience, rarely is the Chair overruled by the other two arbitrators in any pre-trial or final hearing decisions, whether on discovery, evidence, of trial presentation decisions.  Indeed, while not unheard of, it is uncommon for a Chair to be the lone dissenting vote in a 2-1 arbitration Final Award decision.

With no depositions (except in extraordinary circumstances under FINRA Rules 12510 & 13510), no requests for admission, and no general interrogatories, the limited document discovery allowed is crucial to winning a FINRA arbitration.  For this reason, the scope of the document discovery is bitterly fought. Here too, the Chair plays an enhanced role.  Except in a few circumstances, including whether to order a deposition, the Chair will solely determine these key discovery fights.  

We all have biases, whether conscious or unconscious. FINRA arbitration Chairs are no different. Some Chairs are more liberal with discovery, some are more restrictive.  Some Chairs are more industry tilted, some might favor the individual (i.e., customer or Financial Advisor).  And some Chairs may be more willing to award big damages if warranted, while others may be “big numbers” shy. As a licensed FINRA arbitrator for many years, as well as representing Financial Advisors in scores of FINRA arbitrations over 20+ years, IMcP’s Joshua Iacuone uses his unique insight in the all-important rank & strike process.

It is important to review the Chair’s past decisions.  Depending upon the circumstance, it may be a good idea to even contact other lawyers who have practiced before the Chair in past FINRA arbitrations to get a feel for the Chair’s temperament and rulings, especially about discovery.

Accordingly, while it is important to carefully consider all the arbitrators before your rank and strike list is due, it is imperative that you carefully rank and strike, and select, the right Chair for your case.

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