The Expert's Examiner

January 17, 2021

FINRA DRS POSTPONES IN-PERSON HEARINGS THROUGH BEGINNING OF APRIL. FINRA’s Office of Dispute Resolution Services (“DRS”) has again administratively postponed all in-person arbitration and mediation hearings. The January 5 announcement now includes hearings through April 2; the previous date was February 28

As was the case before, DRS adds: “Please note that postponing a hearing will not affect other case deadlines. All case deadlines will continue to apply and must be timely met unless the parties jointly agree otherwise.” The updated announcement offers fee waivers for stipulated postponement of hearings set through June 30, 2021. Why the latest date pushback? Says DRS: “Currently, none of the 70 hearing locations demonstrate public health conditions that are consistent with CDC guidance for activities such as in-person hearings.”

(ed: *As we’ve said before, with the ongoing spike in COVID-19 cases, we’re not surprised. In fact, things are still moving in the wrong direction. For a while Pittsburgh and Syracuse made the grade, but as of January 2021, there are no hearing locations listed. **We assume April 2 was chosen instead of March 31 because it’s the end of a work week. ***We analyzed in SAA 2020-34 (Sep. 9) the forum’s COVID-19 safety protocol and process.)


FINRA DISPUTE RESOLUTION SERVICES FILES TO MAKE OFFICIAL ITS NAME CHANGE FROM LAST MAY. It’s Already in Effect. OCIE ALSO HAS A NEW NAME. We reported in SAA 2020-17 (May 6) that what we all knew as the “FINRA Office of Dispute Resolution,” had become “FINRA Dispute Resolution Services” on May 4. A visit to FINRA’s Webpage confirmed the change; for example, the dispute resolution landing page led with the new title. 

FINRA Change Announced
Why the FINRA change? We previously reported in SAA 2020-15 (Apr. 22) that, according to FINRA Executive Vice President and Director of Dispute Resolution Rick Berry, the new moniker would hopefully reflect better to the outside world that his group administers, rather than resolves, disputes -- an obvious distinction to those in arbitration practice, but one that can be confusing to others, including investors and even the general media. The FINRA Award template was changed in May to reinforce the concept that party-selected neutrals, not FINRA, are the architects and authors of the Award decision.

Change Made Official
FINRA on October 29 made the name change official as part of SR-FINRA-2020-039 -- an omnibus rule filing with the SEC making several name changes. The rule transforms all references from ODR to DRS in the various Codes (industry, customer, and mediation). Because of the uncontroversial “belts and suspenders” nature of the changes, the Authority filed for immediate effectiveness, meaning the effective date and implementation date was October 29.

SEC Change
The new year also brought a name change at the SEC, which on December 18 issued Statement on the Renaming of the Office of Compliance Inspections and Examinations to the Division of Examinations. Why the change? Say the Commissioners: “This year marks 25 years since the creation of the SEC’s Office of Compliance Inspections and Examinations (OCIE). Since its inception, OCIE has grown – in both number (over 1,000) and percentage (23%) of SEC employees – to represent the second largest office or division at the SEC, second in size only to the Division of Enforcement. In that time, OCIE has greatly increased the effectiveness of the Commission’s compliance and examination function. OCIE’s presence and engagement has promoted a strong culture of compliance within the financial services industry. To better reflect these important contributions and its overall role at the Commission, starting today, OCIE will be renamed the ‘Division of Examinations’ (the Division). The SEC’s five Commissioners unanimously support this decision.”

(ed: Both changes, being more descriptive, make sense.)


FINRA DRS POSTS STATS THROUGH NOVEMBER: MORE OF THE SAME. FINRA Dispute Resolution Services (“DRS”) posted case statistics through November, with most numbers slowly returning to near-normal during this abnormal year.

Arbitration Stats
We’ll save our usual exhaustive analysis for the year-end stats, but in brief the headlines are: 1) while overall arbitration filings through November are still up at 5%, customer claims continue to remain way down (-15%) but have increased slightly for the third month in a row; 2) industry disputes remain up significantly (38%) but have cooled off from the year’s earlier torrid pace; 3) industry case filings for the year are still about half (48%) of customer arbitration filings; and 4) for the third month in a row pending cases declined. Overall arbitration average turnaround times were 14.7 months, with hearing cases taking 14.6 months.

There were 376 mediation cases in agreement, a 31% decrease. The settlement rate remains extremely high at 84%. There are now 8,090 DRS arbitrators, 3,798 public and 4,292 non-public. Last, FINRA’s new “Virtual Arbitration Hearings” category shows that through November: 124 cases were conducted with one or more hearings via Zoom (51 customer and 73 industry cases). There were 136 joint motions for virtual hearings (43 customer and 93 industry cases).

(ed: *With customer claims up – albeit slightly – for the third month in a row, are we seeing the beginning of “Corona Crash” customer case filings? Time will tell. **As the chart below shows, the last three months have shown reductions in pending cases, reflecting a 200+ case decline from the year’s cumulative high water mark of 5,415 open cases. Our theory remains that, with the resumption of in-person hearings remaining an elusive goal, and with a second wave of the pandemic clearly here, more parties are coming to embrace the virtues of virtual hearings.)

Month  Open cases Change Cum
Mar 4,781 - -
Apr 4,824 43 43
May 4,897 73 116
June 4,958 61 177
July 5,062 104 281
August 5,415 353 634
Sep 5,392 -23 611
Oct 5,304 -88 523
Nov 5,205 -99 424


SEC PUBLISHES CHAIR HONORARIA INCREASES. We reported in SAA 2020-48 (Dec. 24) that the SEC on December 17 approved Notice of Filing of a Proposed Rule Change to Amend the FINRA Codes of Arbitration Procedure to Increase Arbitrator Chairperson Honoraria and Certain Arbitration Fees (SR-FINRA-2020-035).

What were the specifics? As described in the Approval Order, the proposed rule change amends the customer and industry Codes to: “(1) increase the additional hearing day honorarium Chairs receive for each hearing on the merits from $125 to $250 and; (2) create a new $125 Chair honorarium for each prehearing conference in which the Chair participates. Under the proposed rule change, these increases would be funded primarily by certain increases to the member surcharge and process fees for claims of more than $250,000 or claims for non-monetary or unspecified damages. The proposed rule change would also increase filing fees and hearing session fees for customers, associated persons and members bringing claims of more than $500,000 or claims for nonmonetary or unspecified damage.”

What’s Next
We said in #48: “Next is Approval Order publication in the Federal Register and a FINRA Regulatory Notice setting the effective date.” We can now report that the former occurred on December 23 (Vol. 85, No. 247, P. 84053). Next is publication of a FINRA Regulatory Notice setting the effective date. We’re guessing that effectiveness will be “hearings held” versus “cases filed” but one never knows.

(ed: As we’ve said before, this is good news. $850 a day – $600 for two hearing sessions plus $250 – is decent compensation, and the “extra” for IPHCs is fair.)


A FUNNY THING HAPPENED ON THE WAY TO EXPUNGEMENT RULE APPROVAL: SEC IS WEIGHING DISAPPROVAL. The SEC on December 18 issued a notice indicating potential disapproval of FINRA Dispute Resolution Services’ (“DRS”) proposed rule establishing a special panel for expungement requests and making other changes.

We reported in SAA 2020-36 (Sep. 23) that, FINRA on September 22, 2020 filed SR-FINRA-2020-030, Proposed Amendments to the Codes of Arbitration Procedure Relating to Requests to Expunge Customer Dispute Information, Including Creating a Special Arbitrator Roster to Decide Certain Expungement Requests. As discussed in SAAs 2020-37 (Oct. 7) & -36 (Sep. 23): “The proposed rule change, which incorporated comments and suggestions received on Regulatory Notice 17-42,  would amend the Codes to:

“(1) impose requirements on expungement requests (a) filed during an investment-related, customer initiated arbitration (‘customer arbitration’) by an associated person, or by a party to the customer arbitration on-behalf-of an associated person (‘on-behalf-of request’), or (b) filed by an associated person separate from a customer arbitration (‘straight-in request’); (2) establish a roster of arbitrators with enhanced training and experience from which a three-person panel would be randomly selected to decide straight-in requests; (3) establish procedural requirements for expungement hearings; and (4) codify and update the best practices of the Notice to Arbitrators and Parties on Expanded Expungement Guidance (Guidance) that arbitrators and parties must follow. In addition, the proposed rule change would amend the Customer Code to specify procedures for requesting expungement of customer dispute information arising from simplified arbitrations. The proposed rule change would also amend the Codes to establish requirements for notifying state securities regulators and customers of expungement requests” (footnote omitted).

The SEC published Notice of the proposed rule in the Federal Register on October 1 (Vol. 85, No. 191, P. 62142). Just eight comments were posted as of the comment period’s close; most were supportive, but almost all suggested significant improvements. We analyzed in SAA 2020-40 (Oct. 29) some representative institutional comments. We encouraged readers to consult the letters for more details and specifics, given space limitations.

DRS Amends the Filing
DRS responded to comments on December 18 in a 20-page letter from Assistant General Counsel Mignon McLemore. While urging approval, FINRA agreed to several amendments, which we repeat below essentially verbatim:

SEC’s Notice
Also on December 18 the Commission issued Release No. 34-90734, Notice of Filing of Amendment No. 1 and Order Instituting Proceedings to Determine Whether to Approve or Disapprove the Proposed Rule Change, as modified by Amendment No. 1, to Amend the Codes of Arbitration Procedure Relating to Requests to Expunge Customer Dispute Information, Including Creating a Special Arbitrator Roster to Decide Certain Expungement Requests. The purpose? “To solicit comments on Amendment No. 1 from interested persons and to institute proceedings to determine whether to approve or disapprove the Proposed Rule Change, as modified by Amendment No. 1.” What’s the concern? While somewhat vague, the Notice says: “Institution of proceedings is appropriate at this time in view of the legal and policy issues raised by the Proposed Rule Change, as modified by Amendment No.1.” The Notice adds, however, that institution of proceedings: “does not indicate that the Commission has reached any conclusions with respect to the Proposed Rule Change ….”

Comments Due
We reported in #48 that comments would be due 21 days after publication in the Federal Register, with rebuttal comments due 35 days thereafter. We can now report that publication occurred on December 28 (Vol. 85, No. 248, P. 84396), and that comments are due by January 19. Assuming there are comments, rebuttal comments are due by February 1.

(ed: In our experience and that of other experienced practitioners we’ve consulted, this is very rare to say the least. Even as to SRO rulemaking generally, disapproval proceedings have been scant – although it does happen. Of course, disapproval proceedings are not necessary if the staff can negotiate with the SRO to submit a rule change that the Commission can accept. In our view, something has changed in the mix here. Either the Commission is stepping back from that polite interaction approach generally, in a move to become more hands on, or the staff could not get what they wanted here (or were perhaps in disagreement) and stepped back to let the Commission decide the issue. An unusual occurrence any way you slice it.)


FINAL DOL FIDUCIARY RULE PUBLISHED. GOES INTO EFFECT FEBRUARY 16. We analyzed in SAA 2020-30 (Aug. 12) the thousands of comments received on the Department of Labor’s (“DOL”) proposed fiduciary standard rule for those offering retirement investment advice – Improving Investment Advice for Workers & Retirees – that was published in the Federal Register on July 7 (85 FR 40834; Vol. 85, No. 130, P. 40834). 

The exemption, which is harmonized with the SEC’s Regulation Best Interest, allows Investment Advice Fiduciaries to engage in certain prohibited transactions that would otherwise be disallowed under ERISA and the Internal Revenue Code (see our analysis in SAA 2020-25 (Jul. 8)). Recall that the over 6,000 comments received prompted the agency to hold virtual public hearings in early September.

Most recently, we reported in SAA 2020-45 (Dec. 3) that the Department on November 24 submitted the Final Rule to the Office of Management and massive Final Rule, which becomes effective 60 days after its December 18 Federal Register publication (Vol. 85, No. 244. P. 82798), or on February 16, 2021.

(ed: *Recall that the DOL’s old Rule was invalidated by the Fifth Circuit in Chamber of Commerce of the United States v. Department of Labor, 885 F.3d 360 (5th Cir.), en banc review denied (2018). **The Final Rule’s long-term fate is unclear since it will become effective after Inauguration Day, and the Democrats will at that point have control of Congress and the White House.)


ROISMAN NAMED ACTING SEC CHAIR. As reported in SAA 2020-43 (Nov. 19),  SEC Chairman Jay Clayton will be leaving the Commission at the end of 2020, the agency announced in a November 16 Press Release

The Commission announced on December 28 that President Trump had appointed Elad L. Roisman (Republican) as acting Chair. Mr. Roisman has been a Commissioner since 2018, and is former Chief Counsel of the Senate Banking Committee. The remaining Commissioners on the roster are: Caroline Crenshaw (Democrat), Allison H. Lee (Democrat), and Hester M. Peirce (Republican).

(ed: Wonder who will be nominated to replace Mr. Clayton? Media reports that surfaced on January 13 posit that it will be former CFTC Chair Gary Gensler.)


CONEY BARRETT CONFIRMED BY THE SENATE ALONG PARTY LINES AND IMMEDIATELY SWORN IN. After just a few weeks of partisan debate, the Senate on October 26 confirmed Amy Coney Barrett’s Supreme Court nomination by a 52 - 48 essentially party-line vote. She was immediately sworn in by Justice Thomas at a White House ceremony, and again the next morning at the Court. 

All Democrats voted against confirmation and just one Republican – Susan Collins (ME) – crossed over and joined the “Nay” votes. As we reported in SAA 2020-39 (Oct. 22), the Senate Judiciary Committee on October 22 unanimously approved the nomination to fill the open seat at the Supreme Court resulting from the passing of Justice Ruth Bader Ginsburg. All 12 Republican Committee members voted in favor, but Democrats boycotted the vote.

The rapid confirmation and swearing in meant the full Court heard oral argument December 8 in Henry Schein, Inc. v. Archer and White Sales, Inc., No. 19-963. This is significant, given that many landmark arbitration-themed decisions from SCOTUS were decided by 5-4 votes. The issue for review in Schein’s granted Petition for Certiorari is: “Whether a provision in an arbitration agreement that exempts certain claims from arbitration negates an otherwise clear and unmistakable delegation of questions of arbitrability to an arbitrator.

As we blogged recently, based on a very limited sampling, the jury is out on whether Justice Coney Barrett is pro-arbitration, although she certainly seems to lean that way. And the two cases involving FINRA’s arbitration forum resulted in wins for the Authority.

(ed: *Congratulations Justice Coney Barrett! **For those who are curious, Justice Kavanaugh was confirmed by a 50 - 48 vote, with one Democrat – Joe Manchin (WV) – voting to confirm. Justice Gorsuch was confirmed by a 54 - 45 mostly party-line vote. All Republicans voted to confirm, and three Democrats – Joe Donnelly (IN), Heidi Heitkamp (ND) and Sen. Manchin –broke ranks.)


SECURITES ARBITRATION COMMENTATOR AND THE SECURITIES ARBITRATION ALERT: SOME CHANGES TO NOTE. As of July 31, 2020 the Securities Arbitration Commentator, Inc. (“SAC”), owned by Rick Ryder, ceased publishing the Securities Arbitration Alert (“SAA” or "Alert")) and transferred the publication rights to the Alert (only – not the rest of SAC’s assets!) to a new publishing company, Securities Arbitration Alert, LLC (“SAA, LLC”), owned by George Friedman. 

The new Alert commenced publication on August 6. Our mutual goal was to effect a smooth change in leadership with an essentially seamless transition experience for our subscribers, and to continue providing the latest news from the financial services ADR world. As the new year is here, we wanted to offer some helpful information to Securities Experts Roundtable members:

Receiving the Alert: Subscribers were transferred ahead of SAA 2020-29 distribution in August. If you didn’t receive the SAA: 1) email; and 2) please check your spam filter to be sure and the domain are marked as safe senders.

Websites: The Alert has a new Website, The SAC Website remains active at It is now dedicated to SAC's remaining business -- Award Database Services.

Blogs: The SAC Blog has been discontinued and the contents transferred to the new SAA Blog, Links users may have previously bookmarked or embedded will automatically redirect to the new blog.

Twitter: The SAC Twitter handle, @SecDispRes, has been renamed @SecArbAlert. All past posts remain, and followers should have automatically been transferred to the new Twitter account. If something went wrong, just refollow the Alert at the new handle.

The Remaining SAC Services: We stress that only the Alert is under new management! SAC continues, as it has for the past thirty-plus years, to offer Award research services. Those services include arbitrator selection support (through its online ARBchek facility), customized Award searches, periodic Award surveys, and the popular email service: the UA (UPDATE: ARBchek), aka SAC's Award Reporter. ARBChek, owned and operated by SAC, Inc., is SAC's online resource for effectively and efficiently evaluating your FINRA Arbitrator. ARBchek distills FINRA Awards into easy-to-read Arbitrator Summary Reports, highlights the salient points of each decision, provides fingertip access to PDFs of 60,000-plus securities arbitration Awards, supplies background information from its own files about select Awards, and comes in Lite, Regular (ASR) and Deluxe (ASR-ACR) versions. Visit for more info.

SER experts continue to enjoy member benefits provided by SAC in three ways: 1) through a free subscription to weekly UA; 2) by providing client counsel with discounted ARBchek services; and 3) via free listing of relevant expert retentions in SAC's Award Database. Detailed information about these member benefits can be found here on the SER Website.   

Helpful Email Addresses:

(ed: Submitted by George Friedman and Rick Ryder. Our collective thanks for your continued understanding and support!)