June 9, 2025 

Recent changes to FINRA’s arbitrator eligibility criteria are drawing sharp criticism from investor advocates, who argue the reforms could undermine fairness in disputes between brokers and their clients.

The changes, intended to professionalize the arbitration process, now require arbitrators to hold a four-year college degree—up from the previous standard of two years of college-level credits. Additionally, the revised guidelines demand five years of “paid professional experience,” replacing the broader requirement of “paid business and/or professional experience.”

While FINRA, the brokerage industry’s self-regulatory authority, asserts these updates will enhance the quality of arbitrators, critics claim the changes favor the financial industry. The Public Investors Advocate Bar Association (PIABA), a group representing investor interests, contends the narrower criteria will exclude qualified individuals, such as small business owners and other nontraditional professionals, from serving as arbitrators.

PIABA likens the ideal arbitrator pool to a jury in a public court—diverse and representative of the investing public. By contrast, the association argues, the new requirements skew the selection process toward individuals with white-collar backgrounds, potentially introducing bias that benefits the brokerage industry.

“FINRA’s unilateral changes shrink the public arbitrator pool and harm investors,” says PIABA President Adam Gana. “These reforms appear designed to appease the financial industry at the expense of fairness and transparency.”

Gana further criticizes FINRA for failing to consult investor advocacy groups like PIABA during the decision-making process, calling the lack of inclusion “unacceptable.”

FINRA’s Defense

A FINRA spokesperson defended the changes, emphasizing the organization’s commitment to enhancing the arbitration forum. According to the spokesperson, feedback from the National Arbitration and Mediation Committee (NAMC) informed the reforms. NAMC, which oversees the arbitration program, has discussed eligibility updates in prior meetings, including one held last year.

“These criteria address concerns that the prior standards discouraged attorneys and other professionals from joining the arbitrator roster,” the spokesperson said. FINRA did not directly address PIABA’s claims about potential favoritism or the timing of the changes.

Potential Impact on Arbitration Outcomes

Investor advocates worry the changes may tilt the playing field in favor of brokerage firms, particularly in light of recent high-profile arbitration awards granted to investors. PIABA suggests the reforms might be a reaction to these awards, although FINRA has not commented on this allegation.

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

These concerns highlight a broader tension in FINRA’s arbitration system, which has faced longstanding criticism for perceived industry bias. PIABA argues the new guidelines exacerbate these issues by narrowing the arbitrator pool and undermining its diversity.

The Broader Debate

The controversy over FINRA’s reforms underscores a fundamental debate about the fairness and accessibility of arbitration as a dispute resolution mechanism. For wealth advisors and RIAs, the stakes are significant. Advisors often guide clients through the arbitration process, and any perception of bias can erode trust in the financial system.

The updated criteria reflect FINRA’s efforts to professionalize its arbitrator pool, potentially attracting more legal and financial professionals. However, critics argue this comes at the expense of inclusivity, limiting opportunities for individuals with diverse life and professional experiences to participate.

For RIAs, the reforms signal a potential shift in how arbitration disputes are resolved. Advisors may need to adjust their expectations and strategies, particularly when representing clients in disputes with brokerage firms. The changes could also influence how advisors counsel clients about their rights and options in arbitration versus litigation.

What’s Next?

PIABA has called on FINRA to reverse the changes and open the reforms to public comment, emphasizing the importance of transparency and stakeholder engagement. Whether FINRA will heed these calls remains uncertain, but the debate highlights the ongoing need for balance in ensuring both professional rigor and public trust in the arbitration process.

For now, wealth advisors and RIAs should closely monitor developments in this space. Understanding the implications of FINRA’s reforms will be critical to effectively advising clients and maintaining confidence in dispute resolution mechanisms. As the conversation evolves, advisors have an opportunity to advocate for processes that protect investor interests while fostering equity and fairness in the financial system.