PIABA Lashes Out at Finra over Arbitrator Disqualifications
The Public Investors Advocate Bar Association claims Finra is stretching its interpretation of bias to allow its member firms to disqualify arbitrators considered unfavorable to the firms.
By Glenn Koch | January 21, 2026
The Financial Industry Regulatory Authority‘s recent disqualification of arbitrators based on their case history has drawn the ire of investor advocates.
Finra earlier this month upheld Stifel Financial‘s challenge to two prospective arbitrators in an investor claim stemming from former broker Chuck Roberts‘ sale of structured notes, a matter in which Stifel’s brokerage unit has paid judgments and settlements totaling more than $180 million.
The disqualified arbitrators had previously ruled against Stifel in separate cases involving largely the same allegations against Roberts. One case resulted in an award of about $133 million in damages against Stifel; the other carried a more modest award of about $2.3 million.
Finra rule 12407(a) permits any party’s disqualification of an arbitrator for cause, which includes for bias or conflict of interest. The self-regulator, in a notice to the parties dated Jan. 8, said that “the similarities between the current case and the prior cases” suggest that “it is reasonable to infer that [the arbitrators] are biased or lack impartiality in the current case.”
Stifel has cited that ruling in its pending bid to overturn the $133 million award. A Stifel spokesperson did not respond to a request for comment.
Meanwhile, the Public Investors Advocate Bar Association on Thursday “strongly urged” Finra “to address serious and recurring problems related to the improper application of Rule 12407(a) by interpreting ‘bias’ in a manner inconsistent with the law.”
In a letter to Finra President Robert Cook, Piaba President Michael Bixby said “removing arbitrators based solely on prior service in cases involving the same broker or investment is not merely legally incorrect but practically unworkable and leads to absurd results.”
Bixby wrote that the practice “unfairly benefits repeat-player respondents,” in that they are allowed to remove arbitrators that have previously ruled against them, a strategic move unavailable to “single-shot customer claimants.” Bixby’s letter did not specifically address Stifel, but in a statement released Thursday, he referenced structured notes in providing hypothetical examples of Finra arbitrator disqualifications.
“We respectfully but urgently request that FINRA immediately revise its application of Rule 12407(a) to conform to case law and the language of the Rule, and cease granting removal motions based solely on an arbitrator’s prior service in cases involving the same broker-dealer, investment product, or legal theory,” Bixby wrote.
A Finra spokesperson declined comment.
Finra arbitration rules have been a contentious topic of late. In May, the self-regulator tightened its qualifications for arbitrators, requiring a four-year degree versus the previous requirement of at least two years of college-level credits. In the same rule revision, Finra said its arbitrators must also have at least five years of full-time paid professional work experience that requires advanced training and education. Previously the role called for five years of “paid business and/or professional experience.”
Critics said the new qualifications would professionalize arbitrator pools, making them more likely to side with brokerage firms than with everyday investors.
A Finra spokesperson told FA-IQ at the time that the revised qualifications would “help address the feedback that we have received that the prior standards discouraged attorneys and other professionals from applying to the [arbitrator] roster.”
Last month, the Securities Industry and Financial Markets Association proposed further changes to the Finra arbitration process, including a suggestion to limit punitive damages and a provision in which certain claims could be removed from the Finra dispute-resolution system altogether.
Investor advocates reacted similarly, with former Piaba president Sam Edwards telling FA-IQ at the time “that Sifma is aiming to create an arbitration process that more closely resembles traditional litigation and “absolutely flies in the face of investor protection.”