The Wall Street Journal (April 12, 2013 5:27 pm) -- The Financial Industry Regulatory Authority's board on Thursday will consider changes intended to simplify the rules for investors selecting an arbitration panel.

Finra, a self-funded industry watchdog group that oversees the arbitration process, regularly contends with charges that the system favors brokerages over individuals. It has been making changes to help ensure a level playing field.

Cases brought by brokerage clients involving disputes of more than $100,000 are heard by a three-member panel. Since 2011, Finra has given investors the option of a hearing panel composed entirely of arbitrators who aren't involved in the securities business. Under the rules, the customer can choose between a panel with three "public" arbitrators not affiliated with the industry or a panel of two public arbitrators and one with industry experience.

However, an inexperienced investor without professional guidance from an attorney might not select an all-public panel at the outset, says Ryan Bakhtiari, a Los Angeles-based securities attorney who represents investors.

The proposed change would drop that initial choice from the process and allow the parties to move directly to the stage of selecting arbitrators, where an investor can eliminate all candidates with industry ties, according to a notice posted on Finra's website.

Under the proposed new rule, all parties would see lists of 10 public arbitrators who are qualified to serve as chairman, 10 public arbitrators and 10 industry-affiliated arbitrators.

The proposal would permit either side of the dispute to strike up to four names from each of the public arbitrator lists. However, any party could strike all of the arbitrators on the industry-affiliated list, ensuring an all-public arbitration panel.

Mr. Bakhtiari, a former president of the Public Investors Arbitration Bar Association, believes most investors have elected the all-public option in the past year. The proposed rule change "recognizes that trend," he says.

Finra data show that investors fare better with all-public panels. Last year, in cases decided by three public arbitrators, customers were awarded damages 49% of the time. In cases decided by a panel including one person with industry ties, however, investors won only 33% of the time.

Securities attorneys caution that the sample size in the Finra data is small—just 210 cases—and that the merits of a claim likely affect the outcome of a case more than the backgrounds of the panelists who hear it.

The proposed change comes on the heels of other changes designed to draw a clearer distinction between public and industry arbitrators.