By Glenn Koch|March 3, 2026

The Financial Industry Regulatory Authority is asking for the industry’s suggestions regarding a potentially wide-ranging overhaul of the self-regulator’s arbitration process.

Finra on Monday published a regulatory notice seeking comment on its plan to modernize its arbitration process, the latest measure in the Finra Forward initiative announced nearly a year ago.a

The self-regulator is seemingly willing to revise nearly every aspect of its arbitration process, as Monday’s notice includes multiple feedback requests for each of 12 different arbitration-related topics, ranging from arbitrator qualifications, selection and training to forum selection and punitive damages.

Notable among the topics presented for feedback is the question of whether parties to certain types of disputes should be permitted to remove their case to a forum other than Finra’s dispute-resolution system.

The Securities Industry and Financial Markets Association has twice suggested that idea during the past eight months, each time drawing sharp opposition from the Public Investors Advocate Bar Association.

In addition to asking whether the industry supports opt-outs from its arbitration process, Finra is asking whether it should amend its rules to prohibit certain types of disputes from landing in Finra’s dispute-resolution forum.

The issue of arbitrator qualifications has also been a hot-button topic since Finra raised the bar in that regard last year. Per last year’s revision, Finra arbitrators must now have a four-year degree versus the previous requirement of at least two years of college-level credits. Arbitrators must also have at least five years of full-time paid professional work experience that requires advanced training and education, whereas the role previously required five years of “paid business and/or professional experience.”

Finra on Monday asked whether its standards for selecting arbitrators need further changes, such as whether it should seek arbitrators with a variety of backgrounds or those with specific expertise. The self-regulator also asked for comments regarding arbitrator training requirements.

Finra is asking whether parties should be able to disqualify an arbitrator on any grounds or if guardrails need to be in place to protect consumers and ensure fairness.

The self-regulator is also asking whether arbitrators should be required to provide more transparency regarding the rationale of their decisions.

Per current rules, arbitrators are not required to provide a reasoned explanation for their rulings unless both parties have requested one — and since 2009, only 74 such joint requests have been made, according to Finra.

Arbitrators may also choose to issue a reasoned explanation even if both parties have not requested one, but that seldom occurs for matters other than expungement requests.

Finra is asking whether explained decisions should be mandatory for all or certain types of cases, or, alternatively, whether it should mandate explanation of certain elements of the decision process. Finra is also asking how increasing transparency might affect efficiency of the arbitration process, the finality of awards, and the ability to recruit and retain arbitrators.

Perhaps the most consequential of the issues Finra raised Monday is whether punitive damages should be recoverable in Finra’s forum — another recent bone of contention between Sifma and investor advocates. Finra presented several suggestions for comments, including not only whether punitive damages should be abolished, capped, subject to waivers or appealable — none of which is presently the case — but also whether punitive damages, when awarded, should be accompanied by a reasoned explanation.

Among the other issues Finra raised for feedback were Finra’s eligibility rule that does not permit the filing of a claim more than six years after the events giving rise to the claim, whether the self-regulator should implement stricter guidelines for arbitrators hearing a claim of Form U5 defamation, whether certain information should be redacted from Finra’s Arbitration Awards Online portal, how to address unpaid arbitration awards, and issues surrounding arbitrator discovery.

The self-regulator will accept comments on the topics proposed until May 1. Comments may be submitted through Finra’s website, by email or by regular mail.

Monday’s regulatory notice drew sharp criticism from Piaba, with the industry group’s president, Michael Bixby, telling FA-IQ that the regulatory notice “appears to be a transparent attempt to gut a host of key investor protection safeguards at the demand of the securities industry.”

Bixby took issue with the idea of potentially eliminating or limiting punitive damages, considering that investors over the past five years have won only about 30% of the cases they’ve filed in Finra’s dispute-resolution forum, per Finra statistics. “The industry cannot both claim arbitrators are sophisticated enough to interpret the legal rulings and laws to deny investors claims 70%+ of the time while claiming these same arbitrators do not have the know-how to award a full cup of justice to devastated investors,” Bixby said.

Sifma did not respond to a request for comment.

Meanwhile, attorney Jenice Malecki, whose New York–based firm represents both investors and firms in securities industry arbitration and litigation, told FA-IQ that the many questions Finra posed for feedback “are all very pointed towards the member firm’s desire to control the outcomes in FINRA arbitration and handicap the process.”

Malecki also said that, in presenting more than 60 questions for comment, Finra tilted the response field toward “large firm[s] that can spend unlimited legal fees on … answering.”

Attorney Brian Jaeger, a Boston-based associate at D’Amura & Zaidman, PLLC, told FA-IQ that the six-year eligibility rule is an extremely “nuanced” one, the application of which “[e]ven arbitrators struggle to comprehend.”

Jaeger, whose practice areas include Finra investigations and arbitrations, also said the arbitrator-disqualification rule is one that requires better balancing. Jaeger said that, in its current form, claimants can use the rule “to unilaterally strike all experienced and knowledgeable individuals with securities licenses and backgrounds.”

“Broker-dealer and financial advisor respondents generally want someone who understands securities and finance on the panel. It’s great to have a diverse panel of arbitrators, but there should always be at least one arbitrator with a securities background to educate the other panelists if needed,” Jaeger added.

Jaeger also noted that Finra’s many topics raised for comment did not touch on the issue of defining arbitrator bias — a topic that drew attention recently in Stifel Financial’s ongoing bid to throw out a $133 million arbitration award it called a product of arbitrator bias.