June 04, 2025

Public-interest lawyers are loudly objecting to new guidelines intended to raise the professional caliber of arbitrators hired to mediate disputes between brokers and investors.

Finra, the brokerage industry’s self-regulatory authority, recently updated its eligibility guidelines for its arbitrators, including new educational and professional requirements.

Now, arbitrators must have a four-year college degree. Previously, only two years of college-level credits were required.

Also, the wording of the work requirement changed from five years of “paid business and/or professional experience” to the same duration of “paid professional experience,” favoring some form of white-collar work that requires specific training and education.

The Public Investors Advocate Bar Association, known as Piaba, has long been critical of Finra’s arbitration process. Now it argues that these changes will make the pool of arbitrators a more exclusive group that is less representative of the investing public and more likely to include professionals with ties to the industry. The association argues that the arbitration pool should be comparable to a jury pool empaneled in a public court. It is calling on Finra to reverse the changes and invite comments from the public.

Piaba President Adam Gana took issue with Finra’s process for enacting the reforms, which he says didn’t involve his group or other consumer advocates. He calls it “unacceptable.”

“Had Piaba been consulted, we would have made clear that these changes shrink the public arbitrator pool and harm investors,” he says. “Instead, Finra took a fly-by-night approach that appears aimed at appeasing the financial industry at the expense of fairness.”

A Finra spokesman didn’t directly address questions about the process for the changes or the charge that the revamped criteria will favor brokerage firms in disputes with clients.

“We are constantly looking for ways to enhance the arbitration forum, and that includes the quality of the arbitrators,” the spokesman says.

He adds that Finra solicited input from its National Arbitration and Mediation Committee on the changes, and that that panel has discussed reforms to arbitrator eligibility in past meetings, including one last year.

The new criteria “will help address the feedback that we have received that the prior standards discouraged attorneys and other professionals from applying to the roster,” the spokesman says.

That is not an outcome Piaba favors, however.

“The changes drastically limit who can serve as a public arbitrator, excluding experienced small business owners and other qualified professionals,” the group says. “Finra’s industry-leaning unilateral changes will make the arbitrator pool far less like any typical jury and likely result in increased favoritism for the securities industry.”

Piaba further suggests a linkage between what it sees as more industry-friendly changes to the arbitration process and some of the recent blockbuster awards arbitrators have granted investors, a charge Finra’s spokesman declined to address.

“The timing and nature of the rule change suggest Finra may be responding to recent investor victories that displeased industry members,” Piaba says.