Federal Register / Vol. 89, No. 249 / Monday, December 30, 2024 / Notices 106635 

26 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See infra note 9 and accompanying text. 

4As a neutral administrator of the arbitration 

forum, DRS does not participate in the decisionmaking process by arbitrators. DRS maintains a 

roster of over 8,300 arbitrators. See FINRA, 

Arbitration and Mediation, Dispute Resolution 

Continued 

A. by order approve or disapprove 

such proposed rule change, or 

B. institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

NYSEARCA–2024–112 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–NYSEARCA–2024–112. 

This file number should be included on 

the subject line if email is used. To help 

the Commission process and review 

your comments more efficiently, please 

use only one method. The Commission 

will post all comments on the 

Commission’s internet website (https:// 

www.sec.gov/rules/sro.shtml). Copies of 

the submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–NYSEARCA–2024–112 and should 

be submitted on or before January 21, 

2025. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.26

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2024–30916 Filed 12–27–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101993; File No. SR– 

FINRA–2024–022] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of a 

Proposed Rule Change To Amend the 

Codes of Arbitration Procedure To 

Make Clarifying, Technical, and 

Procedural Changes to the Arbitrator 

List Selection Process 

December 19, 2024. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (‘‘Act’’ 

or ‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on December 19, 2024, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by FINRA. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to amend the 

Code of Arbitration Procedure for 

Customer Disputes (‘‘Customer Code’’) 

and the Code of Arbitration Procedure 

for Industry Disputes (‘‘Industry Code’’) 

(together, ‘‘Codes’’) to make changes to 

certain provisions relating to arbitrator 

list selection. 

The proposed rule change would 

amend FINRA Rules 12403 (Cases with 

Three Arbitrators) and 13403 

(Generating and Sending Lists to the 

Parties) to increase the opportunity for 

public arbitrators who are not qualified 

to serve as chairpersons 3 to be selected 

by a computer algorithm, known as the 

‘‘list selection algorithm,’’ for the list of 

arbitrators that is sent to the parties in 

certain customer and industry disputes 

that have a three-arbitrator panel. 

In addition, the proposed rule change 

would make changes to the Codes that 

are consistent with FINRA’s focus on 

increasing the transparency of arbitrator 

list selection and with current practices 

that were developed to efficiently 

administer arbitrator list selection. 

Specifically, the proposed rule change 

would amend FINRA Rule 12402 (Cases 

with One Arbitrator), FINRA Rule 12403 

(Cases with Three Arbitrators), FINRA 

Rule 13403 (Generating and Sending 

Lists to the Parties), FINRA Rules 12404 

and 13407 (Additional Parties), FINRA 

Rule 13404 (Striking and Ranking 

Arbitrators), FINRA Rules 12407 and 

13410 (Removal of Arbitrator by 

Director), and FINRA Rule 13804 

(Temporary Injunctive Orders; Requests 

for Permanent Injunctive Relief). The 

proposed rule change also would make 

non-substantive, technical changes to 

FINRA Rules 13406 (Appointment of 

Arbitrators; Discretion to Appoint 

Arbitrators Not on List) and 13411 

(Replacement of Arbitrators) to update 

cross-references in those rules. 

The text of the proposed rule change 

is available on FINRA’s website at 

http://www.finra.org, at the principal 

office of FINRA and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

I. Overview of FINRA’s Arbitrator List 

Selection Process 

Decisions in the FINRA Dispute 

Resolution Services (‘‘DRS’’) arbitration 

forum are made by independent 

arbitrators.4 To ensure fairness to all 


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Statistics, https://www.finra.org/arbitrationmediation/dispute-resolution-statistics; FINRA, 

Arbitration and Mediation, Become an Arbitrator, 

https://www.finra.org/arbitration-mediation/ 

become-arbitrator. 

5See FINRA Rules 12400(a) and 13400(a). 

6See FINRA Rules 12400(b) and 13400(b). 

7See FINRA Rules 12100(aa) and 13100(x). 

8See FINRA Rules 12100(t) and 13100(r). 

9See FINRA Rules 12400(c) and 13400(c). 

10The panel will consist of three arbitrators in 

both customer and industry disputes when (1) the 

amount of the claim is more than $50,000 but not 

more than $100,000, exclusive of interest and 

expenses, and the parties agree in writing to three 

arbitrators; or (2) the amount of the claim is more 

than $100,000, exclusive of interest and expenses, 

is unspecified, or the claim does not request money 

damages, unless the parties agree in writing to one 

arbitrator. See FINRA Rules 12401 and 13401. 

11See FINRA Rules 12403(a)(1) and 13403(b)(2). 

12The list selection algorithm will automatically 

exclude arbitrators from the lists based upon 

current conflicts of interest identified within the list 

selection algorithm. See FINRA Rules 12402(b)(2), 

12403(a)(3), 13403(a)(4), and 13403(b)(4). In 

addition, DRS conducts a review for other conflicts 

not identified within the list selection algorithm. 

See FINRA Rules 12402(b)(3), 12403(a)(4), 

13403(a)(5), and 13403(b)(5). If any arbitrators are 

removed due to such conflicts, the list selection 

algorithm is used to generate replacement 

arbitrators. See FINRA Rules 12402(b)(3), 

12403(a)(4), 13403(a)(5), and 13403(b)(5). 

13The term ‘‘Director’’ means the Director of DRS. 

Unless the Code provides that the Director may not 

delegate a specific function, the term includes 

FINRA staff to whom the Director has delegated 

authority. See FINRA Rules 12100 (m) and 

13100(m). 

14See FINRA Rules 12403(b) and 13403(c). 

15See infra Section A.1.III. (‘‘Proposed 

Amendments to Increase the Transparency of the 

Arbitrator Selection Process’’); see also FINRA 

Rules 12400(a), 12403(c)-(e), 13400(a), 13404, 

13405, and 13406. FINRA notes that the proposed 

rule change would impact all members, including 

members that are funding portals or have elected to 

be treated as capital acquisition brokers (‘‘CABs’’), 

given that the funding portal and CAB rule sets 

incorporate the impacted FINRA rules by reference. 

16See FINRA Rules 12403(a)(2) and 13403(b)(3). 

17See FINRA Rules 12403(a)(2) and 13403(b)(3). 

18See FINRA Rules 12403(a)(2) and 13403(b)(3). 

19An individual arbitrator cannot be selected for 

both the Chairperson List and the Public List for the 

same case. See FINRA Rules 12403(a)(2) and 

13403(b)(3). 

20See infra Section B.ii. (Economic Baseline). 

21See proposed FINRA Rules 12403(a)(3) and 

13403(b)(4). The list selection algorithm would 

affect the proposed rule change by including the 

names of public arbitrators who are not chair 

qualified twice on the roster of available public 

arbitrators used to randomly generate a Public List. 

For more information on how the list selection 

algorithm currently generates a Public List, see 

https://www.finra.org/arbitration-mediation/about/ 

arbitration-process/arbitrator-selection. Although 

the proposed rule change would give public 

arbitrators who are not chair-qualified two chances 

to be selected for a Public List, proposed FINRA 

Rules 12403(a)(3) and 13403(b)(4) would provide 

that an individual arbitrator cannot appear more 

than once on the Public List selected for the same 

case. 

parties during arbitrator list selection, 

FINRA uses a computer algorithm, 

known as the list selection algorithm, to 

generate lists of arbitrators on a random 

basis from its rosters of arbitrators for 

the selected hearing location.5 DRS 

maintains three rosters of arbitrators: 

public arbitrators, non-public 

arbitrators, and arbitrators who are 

eligible to serve as chairperson of a 

panel.6 In general, a public arbitrator is 

a person who is otherwise qualified to 

serve as an arbitrator and is not 

disqualified from service as a public 

arbitrator due to their current or past 

ties to the financial industry.7 A nonpublic arbitrator is a person who is 

otherwise qualified to serve as an 

arbitrator and is disqualified from 

service as a public arbitrator due to their 

current or previous association with the 

financial industry.8 An arbitrator is 

eligible to serve as a chairperson if they 

have completed FINRA’s chairperson 

training and (1) have a law degree and 

are a member of a bar of at least one 

jurisdiction and have served as an 

arbitrator through award on at least one 

arbitration administered by a selfregulatory organization (‘‘SRO’’) in 

which hearings were held; or (2) have 

served as an arbitrator through award on 

at least three arbitrations administered 

by an SRO in which hearings were 

held.9

The number and composition of the 

arbitrator lists that are generated using 

the list selection algorithm varies 

depending on the nature of the dispute 

and whether it will be heard by a panel 

of three arbitrators or by a single 

arbitrator. With respect to both customer 

disputes with three arbitrators and 

industry disputes involving associated 

persons with three arbitrators 10—the 

two types of disputes affected by the 

proposed amendments to the 

procedures for generating lists of public 

arbitrators—DRS uses the list selection 

algorithm to generate three lists: (1) a 

list of 10 public arbitrators from the 

FINRA chairperson roster (‘‘Chairperson 

List’’); (2) a list of 15 arbitrators (in 

customer disputes) or 10 arbitrators (in 

industry disputes involving associated 

persons) from the FINRA public 

arbitrator roster (‘‘Public List’’); and (3) 

a list of 10 arbitrators from the FINRA 

non-public arbitrator roster (‘‘NonPublic List’’).11

Once the lists of arbitrators are 

generated,12 the Director 13 sends the 

lists to the parties.14 The parties then 

select their arbitrators through a process 

that involves striking and ranking the 

arbitrators on the lists, which is 

described in more detail in Section III 

below in connection with the discussion 

of the proposed amendments to increase 

the transparency of the arbitrator 

selection process.15

II. Proposed Amendments to the 

Procedures for Generating Public Lists 

Currently, under the Codes, when 

generating the three lists of arbitrators to 

send to the parties in both customer 

disputes with three-person panels and 

industry disputes involving associated 

persons with three-person panels, the 

list selection algorithm will first 

generate a Chairperson List from 

FINRA’s roster of chair-qualified public 

arbitrators.16 When the list selection 

algorithm selects the chair-qualified 

public arbitrators for the Chairperson 

List for an arbitration, those chairqualified public arbitrators will not be 

eligible to be selected for a Public List 

for the arbitration and, therefore, will be 

automatically removed from the list 

selection algorithm before the Public 

List is generated for the arbitration.17

However, the chair-qualified public 

arbitrators who are not selected by the 

list selection algorithm for the 

Chairperson List for an arbitration will 

be eligible to be selected for the Public 

List for the arbitration.18 Thus, chairqualified public arbitrators have two 

chances to be selected for lists for an 

arbitration: they may be selected for the 

Chairperson List, and if they are not 

selected for the Chairperson List, they 

may be selected for the Public List.19

Public arbitrators who are not chairqualified do not have the same 

opportunity. Rather, public arbitrators 

who are not chair-qualified can only be 

selected for a Public List and, therefore, 

have only one chance to be selected for 

a list of arbitrators. As a result, public 

arbitrators who are not chair-qualified 

are less likely to be selected for a list 

than chair-qualified public arbitrators, 

even though the number of public 

arbitrators who are not chair-qualified 

greatly exceeds the number of chairqualified public arbitrators.20

To address this imbalance and 

increase the opportunity for public 

arbitrators who are not chair-qualified to 

be selected for the Public List, the 

proposed rule change would amend 

FINRA Rules 12403(a)(3) and 

13403(b)(4) to provide that, in preparing 

the Public List, the list selection 

algorithm will provide two chances for 

selection to public arbitrators who are 

not chair-qualified, and will continue to 

provide one chance for selection to 

chair-qualified public arbitrators.21 The 

procedures for generating the Public List 

would not otherwise be modified under 

the proposed rule change. 

FINRA believes it is appropriate to 

address this imbalance and increase the 

opportunity for public arbitrators who 

are not chair-qualified to be selected for 

Public Lists. By providing an additional 


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22See infra Section B.iii. (Economic Impact). 

23See infra Section B.iii. (Economic Impact). 

24See infra Section B.iii. (Economic Impact). 

25See FINRA Rules 12405(b) and 13408(b). 

26FINRA is proposing to move this language to 

new paragraphs (c)(2)(D) of FINRA Rule 12402, 

(b)(2)(D) of FINRA Rule 12403, and (c)(2)(D) of 

FINRA Rule 13403, without any substantive 

changes. FINRA Rules 12402(c)(2), 12403(b)(2), and 

13403(c)(2) also currently provide that when a party 

requests additional information, the Director may, 

but is not required to, toll the time for parties to 

return the ranked lists. FINRA is proposing to move 

this language to new paragraphs (c)(2)(E) of FINRA 

Rule 12402, (b)(2)(E) of FINRA Rule 12403, and 

(c)(2)(E) of FINRA Rule 13403, without any 

substantive changes. These technical changes 

would result from the proposed rule changes 

discussed below, which would create new 

subparagraphs under these rules. 

opportunity to be selected for Public 

Lists, the proposed rule change may 

increase the likelihood for public 

arbitrators who are not chair-qualified to 

be selected by parties to serve as 

panelists, which could help FINRA 

retain these arbitrators on its roster. 

FINRA has observed that parties appear 

to prefer chair-qualified public 

arbitrators who have experience in the 

DRS arbitration forum and a record of 

previous arbitration award outcomes. If 

arbitrators who are new to the roster or 

have less experience in the forum are 

never selected by parties to serve as 

panelists, they may lose interest in 

serving as arbitrators in the DRS 

arbitration forum. The proposed rule 

change could help incent new or less 

experienced public arbitrators to remain 

on FINRA’s arbitrator roster by 

providing a higher likelihood of 

selection by the parties as a panelist 

than currently exists under the Codes.22

The proposed rule change also may 

help FINRA increase the roster of chairqualified public arbitrators. By 

increasing the opportunity for public 

arbitrators who are not chair-qualified to 

be selected by the parties to serve as 

panelists, the proposed rule change 

would help these arbitrators to gain the 

experience they need to become chairqualified. This, in turn, could help 

FINRA increase the number of local 

chairpersons across hearing locations.23

Parties generally prefer chair-qualified 

public arbitrators who live near their 

hearing location and who are more 

likely to be familiar with local laws and 

customs. However, 78 percent of 

hearing locations lack a sufficient 

number of local chairpersons to generate 

enough arbitrators for Chairperson Lists, 

which means that the list selection 

algorithm must often generate lists that 

include chair-qualified public 

arbitrators from other hearing 

locations.24 In over half of these hearing 

locations, the roster of local chairqualified public arbitrators could be 

filled by non-chair-qualified public 

arbitrators if they became chairqualified. By increasing the number of 

local chairpersons, the list selection 

algorithm would be able to generate 

Chairperson Lists that include more 

local chair-qualified public arbitrators to 

address parties’ preferences. 

III. Proposed Amendments To Increase 

the Transparency of the Arbitrator 

Selection Process 

FINRA is also proposing to codify 

certain practices that DRS has 

developed to efficiently administer 

arbitrator list selection, establish new 

timeframes for objecting to requests for 

additional information from arbitrators, 

withdrawing such requests for 

additional information, and filing 

motions to remove arbitrators after 

disclosures of causal challenges, and 

align provisions of the Codes related to 

the expungement of customer dispute 

information. These proposed 

amendments are explained in detail 

below. 

A. Shortening the Time for Sending 

Arbitrator Lists to Parties 

FINRA Rules 12402(c)(1), 12403(b)(1), 

and 13403(c)(1) currently provide that 

the Director will send lists of arbitrators 

generated by the list selection algorithm 

to all parties at the same time, within 

approximately 30 days after the last 

answer is due, regardless of the parties’ 

agreement to extend any answer due 

date. In practice, however, DRS sends 

lists of arbitrators to the parties well 

within the 30-day timeframe provided 

by the rules. 

To align FINRA Rules 12402(c)(1), 

12403(b)(1), and 13403(c)(1) with 

current practice, which, in turn, would 

increase transparency and efficiency in 

arbitrator list selection, FINRA is 

proposing to decrease the number of 

days within which the Director sends 

the lists to the parties from 30 days to 

20 days. Specifically, under the 

proposed rule change, FINRA Rules 

12402(c)(1), 12403(b)(1), and 13403(c)(1) 

would be amended to provide that the 

Director will send the lists generated by 

the list selection algorithm to all parties 

at the same time, within approximately 

20 days after the last answer is due, 

regardless of the parties’ agreement to 

extend any answer due date. 

B. Providing Arbitrator Disclosure 

Reports to Parties 

FINRA Rules 12402(c)(1), 12403(b)(1), 

12404(a), 13403(c)(1), 13407(a), and 

13804(b)(3)(A)(i) and (B)(i) currently 

provide that when the Director sends 

lists of arbitrators to the parties, the 

parties will also receive employment 

history for the past 10 years and other 

background information for each 

arbitrator listed. In practice, however, 

DRS requests from arbitrators their full 

employment history after the 

completion of their education, and it 

sends this employment history and 

other background information to the 

parties in a document that DRS refers to 

as a ‘‘disclosure report.’’ 

To align FINRA Rules 12402(c)(1), 

12403(b)(1), 12404(a), 13403(c)(1), 

13407(a), and 13804(b)(3)(A)(i) and 

(B)(i) with current practice and increase 

transparency, the proposed rule change 

would remove the language stating that 

the parties will be provided with each 

arbitrator’s employment history only 

‘‘for the past 10 years.’’ These same 

rules would be amended to clarify that 

an arbitrator’s employment history and 

other background information will be 

provided to the parties in a document 

called a ‘‘disclosure report.’’ 

C. Requesting Additional Information 

About Arbitrators 

FINRA Rules 12405(a) and 13408(a) 

impose upon each arbitrator an 

obligation to make a reasonable effort to 

learn of, and disclose to DRS, any 

circumstances that might preclude the 

arbitrator from rendering an objective 

and impartial determination in a 

proceeding. This obligation to disclose 

interests, relationships, or 

circumstances that might preclude an 

arbitrator from rendering an objective 

and impartial determination is 

continuous, requiring an arbitrator who 

accepts appointment to an arbitration 

proceeding to disclose to DRS and the 

parties, at any stage of the proceeding, 

any such interests, relationships or 

circumstances that arise, or that the 

arbitrator recalls or discovers.25

In addition to imposing these 

affirmative disclosure obligations on 

arbitrators, paragraph (c)(2) of FINRA 

Rules 12402 and 13403 and paragraph 

(b)(2) of FINRA Rule 12403 provide that 

if a party requests additional 

information about an arbitrator, the 

Director will request the additional 

information from the arbitrator, and will 

send any response to all of the parties 

at the same time.26 Because these 

provisions appear in parts of the Codes 

that focus on the appointment of 

arbitrators, however, FINRA is 

concerned that they could be 

misinterpreted as only allowing parties 

to request additional information about 

arbitrators prior to panel appointment. 

In practice, DRS permits the parties to 

request additional information about an 

arbitrator at any point during the 

arbitration proceeding. If an opposing 


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27See FINRA Rules 12405(b) and 13408(b). 

28See FINRA Rule 12402(d)(1) (allowing each 

separately represented party in a customer dispute 

with one arbitrator to strike up to four of the 

arbitrators from the list); FINRA Rule 12403(c)(1)(A) 

(allowing each separately represented party in a 

customer dispute with three arbitrators to strike any 

or all of the arbitrators from a Non-Public List); 

FINRA Rule 12403(c)(2)(A) (allowing each 

separately represented party in a customer dispute 

with three arbitrators to strike up to four of the 

arbitrators from a Chairperson List and up to six of 

the arbitrators from a Public List); FINRA Rule 

13404(a) (allowing each separately represented 

party in an industry dispute to strike up to four of 

the arbitrators from each list, except for lists 

generated, pursuant to FINRA Rule 13403(a)(2), in 

disputes between members with a panel of three 

non-public arbitrators); and FINRA Rule 13404(b) 

(allowing each separately represented party in a 

dispute between members with a panel of three 

non-public arbitrators to strike up to eight of the 

arbitrators from a Non-Public List and up to four of 

the arbitrators from a non-public Chairperson List). 

party does not object to the request for 

additional information, DRS will permit 

the request for additional information to 

be submitted to the arbitrator 

anonymously. If there is an objection, 

however, DRS will disclose to the 

arbitrator the identity of the party 

submitting the request and forward any 

requests and objections to the arbitrator 

who is the subject of the request. 

The proposed rule change would 

align the Codes to DRS’s current 

practice of allowing requests for 

additional information about an 

arbitrator at any stage of the proceeding. 

Specifically, the proposed rule change 

would amend FINRA Rules 12402, 

12403, and 13403 to add new 

paragraphs (c)(2)(A), (b)(2)(A), and 

(c)(2)(A), respectively, to provide that a 

party may request additional 

information about an arbitrator ‘‘at any 

stage of the proceeding’’ by filing with 

the Director and serving all other parties 

with a written request. 

FINRA believes it is appropriate to 

permit parties to request additional 

information about arbitrators at any 

stage of the proceeding because such 

requests could uncover circumstances 

that might preclude an arbitrator from 

rendering an objective and impartial 

decision. Although, as explained above, 

arbitrators have a continuing duty to 

disclose potential conflicts,27 allowing 

the parties to request additional 

information at any stage of the 

proceeding complements arbitrators’ 

continuing duty to disclose, further 

ensures the integrity of final awards, 

and helps to minimize the number of 

requests for vacatur based on an 

arbitrator’s failure to disclose. 

Additionally, because DRS currently 

allows parties as a matter of practice to 

make requests for additional 

information at any stage of the 

proceeding, the proposed rule change 

would align the Codes to increase 

transparency and ensure that all parties 

are aware of their ability to request 

additional information about arbitrators 

at any stage of the proceeding. 

The proposed rule change also would 

align the Codes to DRS’s current 

practice of preserving the anonymity of 

parties who request additional 

information about arbitrators, unless an 

opposing party objects to the request for 

additional information within the 

specified timeframe. Specifically, the 

proposed rule change would provide in 

new paragraphs (c)(2)(A), (b)(2)(A), and 

(c)(2)(A) of FINRA Rules 12402, 12403, 

and 13403, respectively, that a written 

request for additional information about 

an arbitrator may omit any information 

that would reveal the identity of the 

party making the request. The proposed 

rule change would further amend 

FINRA Rules 12402, 12403, and 13403 

to add new paragraphs (c)(2)(C), 

(b)(2)(C), and (c)(2)(C), respectively, to 

provide that, if no opposing party 

objects to the request for additional 

information, the Director and the parties 

shall not disclose the identity of the 

requesting party to the arbitrator. FINRA 

believes it is appropriate to preserve the 

confidentiality of the requesting parties’ 

identities to minimize any potential 

bias. However, when any opposing 

parties object to requests, FINRA 

believes it is then appropriate to 

disclose the requesting parties’ 

identities to minimize the risk of any 

potential bias shifting to the opposing 

parties. Opposing parties have 

expressed concerns that an arbitrator or 

panel may erroneously attribute 

requests for additional information to 

opposing parties and make negative 

inferences against the opposing parties 

based on the request. Moreover, in cases 

involving only two parties, opposing 

parties may choose to file objections to 

requests that disclose their identities, 

which would result in the arbitrator or 

panel being able to identify the 

requesting party by process of 

elimination. 

Finally, to increase efficiency in 

arbitrator list selection, the proposed 

rule change would establish new 

timeframes for an opposing party to 

object to a party’s request for additional 

information, and for the Director to 

forward the request together with any 

objections to the arbitrator who is the 

subject of the request. In addition, the 

proposed rule change would make clear 

that the requesting party may withdraw 

their request for additional information 

prior to the Director forwarding the 

request and any objections to the 

arbitrator. Specifically, paragraphs 

(c)(2)(B), (b)(2)(B), and (c)(2)(B) of 

FINRA Rules 12402, 12403, and 13403, 

respectively, would be amended to 

provide that: (i) within ten days of 

receipt of the request for additional 

information, an opposing party may 

object to the request by filing objections 

with the Director and serving the 

objections on all other parties; and (ii) 

after five days have elapsed from the 

service of any objections and provided 

that the request for additional 

information has not been withdrawn, 

the Director will forward the request 

together with any objections to the 

arbitrator who is the subject of the 

request. 

FINRA believes it is important for the 

proposed rules to establish timeframes 

for objecting to requests for additional 

information and for withdrawing 

requests for additional information, so 

that the parties are aware of their ability 

to object to or to withdraw a request and 

the timeframes for doing so. Further, 

FINRA believes that the proposed ten 

days for an opposing party to object to 

a request for additional information, and 

the five days for a requesting party to 

withdraw a request for additional 

information following an objection, 

would help ensure that the arbitrator list 

selection process and the arbitration 

proceedings are efficient. 

D. Allowing Parties to Strike Arbitrators 

From Lists for Any Reason 

Once the parties receive the lists of 

arbitrators generated by the list selection 

algorithm, they have the opportunity to 

strike a certain number of arbitrators, as 

set forth in FINRA Rules 12402(d)(1), 

12403(c)(1)(A), 12403(c)(2)(A), and 

13404(a) and (b).28 In describing the 

striking process, FINRA Rules 

12402(d)(1), 12403(c)(2)(A), and 

13404(a) and (b) provide that each 

separately represented party may strike 

arbitrators from lists ‘‘for any reason.’’ 

Although Rule 12403(c)(1)(A) also 

describes the arbitrator striking process, 

unlike the other rules related to the 

striking process, it does not expressly 

provide that each separately represented 

party may strike arbitrators from the list 

‘‘for any reason,’’ even though there are 

no limitations on the reasons a party 

may strike an arbitrator. To make the 

provisions describing the striking 

process consistent, the proposed rule 

change would amend FINRA Rule 

12403(c)(1)(A) to expressly provide that 

each separately represented party may 

strike any or all of the arbitrators from 

the Non-Public List for any reason. 

E. Conducting List Selection 

Electronically 

FINRA Rules 12402(d)(1), 

12403(c)(1)(A) and (c)(2)(A), and 


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29See FINRA Rules 12100(v) and 13100(t). 

30See proposed FINRA Rule 12402(d)(1) 

(providing that ‘‘[e]ach separately represented party 

may strike up to four of the arbitrators from the list 

for any reason’’); proposed FINRA Rule 

12403(c)(1)(A) (providing that ‘‘[e]ach separately 

represented party may strike any or all of the 

arbitrators from the non-public arbitrator list for any 

reason’’); proposed FINRA Rule 12403(c)(2)(A) 

(providing that ‘‘[e]ach separately represented party 

may strike up to four of the arbitrators from the 

chairperson list and up to six of the arbitrators from 

the public arbitrator list for any reason’’). 

31 If a party is a pro se customer who opted out 

of using the Party Portal, pursuant to FINRA Rule 

12300(a), the party may return their ranked list to 

the Director by first-class mail, overnight mail 

service, overnight delivery service, hand delivery, 

email, or facsimile. See FINRA Rules 12402(d)(3) 

and 12403(c)(3). 

32FINRA Rules 12404(a) and 13407(a) provide 

that the parties must return their ranked lists 

‘‘within 20 days’’ after the date upon which the 

Director sent the lists to the parties. FINRA Rules 

12402(d)(3), 12403(c)(3) and 13404(d) provide that 

the parties must return their ranked lists ‘‘no more 

than 20 days’’ after the date upon which the 

Director sent the lists to the parties. 

33See FINRA, Basic Arbitrator Training, https:// 

www.finra.org/arbitration-mediation/rules-caseresources/arbitrator-training#basic; ABA Code of 

Ethics for Arbitrators in Commercial Disputes, 

Canon II(G) (requiring that ‘‘[i]f an arbitrator is 

requested by all parties to withdraw, the arbitrator 

must do so.’’), https://www.adr.org/sites/default/ 

files/document_repository/Commercial_Code_of_

Ethics_for_Arbitrators_2010_10_14.pdf. 

34See Notice to Members 01–13 (March 2001), 

https://www.finra.org/rules-guidance/notices/01-13; 

see also Securities Exchange Act Release No. 43291 

(September 14, 2000), 65 FR 57413 (September 22, 

2000) (Notice of Filing of File No. SR–NASD–00– 

34). 

35Requests to remove an arbitrator may not be 

granted when there are extraordinary circumstances 

which make removal inappropriate (e.g., requests 

based on discriminatory grounds). 

36See FINRA Rules 12805(c)(8) and 13805(c)(9); 

see also FINRA Rule 2080(b)(1). 

13404(a) and (b) currently provide that 

each separately represented party may 

strike arbitrators from the list or lists of 

arbitrators ‘‘by crossing through the 

names of the arbitrators.’’ In practice, 

however, parties generally use the Party 

Portal, the web-based system that is 

accessible by arbitration and mediation 

parties and their representatives, to 

complete arbitrator list selection 

electronically.29 To update the Codes 

and align them with the method by 

which parties generally select 

arbitrators, the proposed rule change 

would amend FINRA Rules 12402(d)(1), 

12403(c)(1)(A) and (c)(2)(A), and 

13404(a) and (b) to remove the phrase 

‘‘by crossing through the names of the 

arbitrators.’’ 

FINRA is aware that FINRA Rule 

12300(a)(2) permits pro se customers to 

opt out of using the Party Portal. As a 

result, these parties may receive hard 

copy lists of arbitrators that would 

require them to manually strike names. 

However, FINRA believes that, even as 

amended to remove the phrase ‘‘by 

crossing through the names of the 

arbitrators,’’ FINRA Rules 12402(d)(1), 

12403(c)(1)(A), and 12403(c)(2)(A) are 

broad enough to appropriately instruct 

pro se customers on how to strike 

arbitrators manually from hard copy 

lists.30

F. Extensions of Time To Complete 

Ranked Lists 

FINRA Rules 12402(d)(3), 12403(c)(3), 

12404(a), 13404(d), and 13407(a) 

currently provide that, after striking 

arbitrators and ranking the remaining 

arbitrators according to preference, each 

separately represented party must 

complete and return their ranked lists to 

the Director (generally via the Party 

Portal) 31 either within 20 days or no 

more than 20 days after the date upon 

which the Director sent the lists to the 

parties.32 If the Director does not receive 

a party’s ranked list within that time, 

the Director will proceed as though the 

party did not want to strike any 

arbitrator or have any preferences 

among the listed arbitrators. However, 

FINRA has observed that parties 

frequently file requests with the Director 

to extend the 20-day deadline only after 

it has elapsed. Though FINRA Rules 

12207(c) and 13207(c) provide that the 

Director may extend or modify any 

deadline or time period set by the Code 

for good cause, in practice, the Director 

typically declines a party’s request for 

an extension of time to complete the 

ranked list(s) when such request is filed 

after the 20-day deadline has elapsed, 

absent a showing of extraordinary 

circumstances. 

In its cover letters to parties that 

accompany the lists of arbitrators, DRS 

currently advises parties of the due date 

for the ranked lists. In addition, the 

language in these cover letters provides 

that if the Director does not receive the 

party’s ranked lists on or before the due 

date, the party will be deemed to have 

accepted all arbitrators on the lists. 

FINRA is proposing to align FINRA 

Rules 12402(d)(3), 12403(c)(3), 12404(a), 

13404(d), and 13407(a) with current 

practice, to expressly provide, that 

absent extraordinary circumstances, the 

Director will not grant a party’s request 

for an extension to complete the ranked 

lists that is filed after the deadline has 

elapsed. FINRA believes it is 

appropriate for the Director to require a 

showing of extraordinary circumstances 

before granting parties’ requests to 

extend the time to complete ranked 

list(s) when such requests are filed after 

the deadline has elapsed. FINRA is 

concerned that allowing the Director to 

grant parties’ requests to extend the 

deadline for completing arbitrator list 

selection only by a showing of good 

cause, especially when such requests 

are filed after the deadline has elapsed, 

could lead to unnecessary delays in the 

appointment of arbitration panels and 

arbitration proceedings. 

By requiring a showing of 

extraordinary circumstances, the 

proposed rule change would help 

ensure that the arbitrator list selection 

process and proceedings are efficient. 

FINRA believes it is appropriate to align 

the Codes with this practice, so that 

parties may be made aware of the 

deadline and encouraged to complete 

and return their ranked lists to the 

Director within the 20-day timeframe, or 

so that parties may be encouraged to file 

requests with the Director for extensions 

of the deadline before it has elapsed. 

G. Allowing Parties To Agree To Remove 

an Arbitrator 

DRS makes clear in its training 

materials for arbitrators that, pursuant to 

the requirements of the ABA’s Code of 

Ethics for Arbitrators in Commercial 

Disputes, an arbitrator must withdraw 

from a panel if all of the parties request 

that the arbitrator do so.33 This 

requirement is also supported by Notice 

to Members 01–13, which announced 

approval of amendments to the 

Director’s authority to remove 

arbitrators for cause and described how 

arbitrators could be removed when ‘‘all 

the parties agree that the arbitrator 

should be removed.’’ 34 To help ensure 

that parties are aware of the ability to 

remove an arbitrator upon party 

agreement, the proposed rule change 

would codify the current guidance by 

amending FINRA Rules 12407 and 

13410 to add new paragraph (d)(1) to 

provide that, at any stage of the 

arbitration proceeding, the Director may 

remove an arbitrator if all of the named 

parties agree in writing to the 

arbitrator’s removal.35

The proposed rule change would also 

add new paragraph (d)(2) to FINRA 

Rules 12407 and 13410 that would 

provide that the parties may not agree 

to remove an arbitrator who is 

considering a request to expunge 

customer dispute information, except 

that a party shall be permitted to 

challenge any arbitrator selected for 

cause pursuant to FINRA Rule 

12407(a)(1) or (b) or FINRA Rule 

13410(a)(1) or (b). 

FINRA rules specify a narrow set of 

circumstances in which expungement of 

customer dispute information from the 

Central Registration Depository (CRD®) 

is appropriate.36 In addition, FINRA 

recently amended its rules to make a 

number of significant enhancements to 

address concerns with the expungement 


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37See Securities Exchange Act Release No. 95455 

(August 9, 2022), 87 FR 50170 (August 15, 2022) 

(Notice of Filing of File No. SR–FINRA–2022–024); 

Securities Exchange Act Release No. 97294 (April 

12, 2023), 88 FR 24282 (April 19, 2023) (Order 

Approving File No. SR–FINRA–2022–024); see also 

Regulatory Notice 23–12 (August 2023). 

38FINRA Rule 12800(d)(1)(B)(ii) provides that, if 

an associated person requests expungement during 

a simplified arbitration, the arbitrator from the 

simplified arbitration must consider and decide the 

expungement request regardless of how the 

simplified arbitration closes. 

39A ‘‘straight-in request’’ refers to arbitration 

proceedings in which an associated person requests 

expungement of customer dispute information 

separate from a customer arbitration. Straight-in 

requests must be filed against the member firm at 

which the person was associated at the time the 

customer dispute arose. See FINRA Rule 

13805(a)(1). These requests are less likely to be 

opposed or adversarial in nature because they 

generally involve two parties—associated persons 

and member firms—whose interests may be aligned. 

Like the associated person, the member firm may 

also have an interest in removing information from 

the associated person’s CRD record. 

40See FINRA Rules 12407(a)(1) and 13410(a)(1). 

41See FINRA Rules 12407(b) and 13410(b). 

42See proposed FINRA Rules 12407(e)(2) and 

13410(e)(2). 

43See proposed FINRA Rules 12407(e)(2) and 

13410(e)(2). 

process and to provide additional 

safeguards for ensuring that the 

information in CRD is accurate and 

complete.37 FINRA believes that the 

proposed rule change is consistent with 

these changes related to enhancing the 

expungement process. For example, 

proposed paragraph (d)(2) of FINRA 

Rule 12407 would align with FINRA 

Rule 12800(d) by prohibiting the parties 

from agreeing to remove an arbitrator if 

there is a request to expunge customer 

dispute information during a simplified 

investment-related, customer-initiated 

arbitration (‘‘simplified arbitration’’) 

under FINRA Rule 12800.38

Accordingly, as required by FINRA Rule 

12800(d), the arbitrator who has 

considered the merits of the customer 

dispute in the simplified arbitration 

would also decide the expungement 

request. As noted above, however, the 

proposed rule change would permit a 

party to challenge any arbitrator 

selected for cause pursuant to FINRA 

Rule 12407(a)(1) or (b). 

In addition, proposed paragraph (d)(2) 

of FINRA Rule 13410 would align with 

FINRA Rule 13806, which limits parties’ 

ability to have input into the arbitrators 

who decide straight-in requests.39

Specifically, FINRA Rule 13806 

provides that the list selection algorithm 

will select randomly the three public 

arbitrators from a roster of experienced 

public arbitrators with enhanced 

expungement training to decide a 

straight-in request. The parties are not 

permitted to strike any arbitrators 

selected by the list selection algorithm 

or stipulate to their removal. In 

addition, the parties are not permitted to 

agree to fewer than three arbitrators or 

stipulate to the use of pre-selected 

arbitrators. The parties are permitted, 

however, to challenge an arbitrator 

selected for cause pursuant to FINRA 

Rule 13410(a)(1) or (b). 

FINRA believes the proposed rule 

change would help ensure that the 

expungement process operates 

efficiently and as intended by aligning 

FINRA Rules to make clear that parties 

may not agree to remove an arbitrator 

who is considering a request to expunge 

customer dispute information. However, 

a party could challenge an arbitrator 

selected for cause. 

H. Prohibiting Disclosure of PartyInitiated Challenges To Remove 

Arbitrators 

FINRA Rules 12407 and 13410 permit 

the parties to challenge arbitrators for 

cause. If the challenge occurs after the 

Director sends the lists(s) generated by 

the list selection algorithm to the 

parties, but before the first hearing 

session begins, the Director will grant a 

party’s request to remove an arbitrator if 

it is reasonable to infer, based on 

information known at the time of the 

request, that the arbitrator is biased, 

lacks impartiality, or has a direct or 

indirect interest in the outcome of the 

arbitration.40 If the challenge occurs 

after the first hearing session begins, the 

Director may remove an arbitrator based 

only on information required to be 

disclosed by an arbitrator that was not 

previously known by the parties.41

In two separate letters—one that 

accompanies the lists of arbitrators and 

another that advises the parties of the 

panel composition—DRS currently 

advises parties during arbitrator list 

selection that they may not inform an 

arbitrator or panel of an opposing 

party’s request to remove an arbitrator 

for cause. The language in both letters 

reads, ‘‘Parties are advised that they 

may not inform the panel of an 

opposing party’s causal challenge.’’ 

The proposed rule change would 

align FINRA Rules 12407 and 13410 

with the guidance provided by DRS, by 

adding a new paragraph (e)(1) to each 

rule, to expressly provide that a party 

may not inform the panel or arbitrator 

of another party’s request to remove an 

arbitrator for cause. 

The proposed rule change also would 

establish a remedy if a party discloses 

to the arbitrator or panel an opposing 

party’s request to remove an arbitrator 

for cause. Specifically, the proposed 

rule change would amend FINRA Rules 

12407 and 13410 to add a new 

paragraph (e)(2), which would give the 

party that requested removal of an 

arbitrator the option to file a written 

motion with the Director for removal of 

the arbitrator within five days of being 

made aware of the disclosure. The 

requesting party may be made aware of 

the disclosure in several different ways, 

including in a pleading or other 

document filed with the Director, or 

during a prehearing conference or 

hearing. If the requesting party does not 

make a motion for removal of the 

arbitrator within five days of being 

made aware of the disclosure, then the 

requesting party would forfeit the 

opportunity to request removal of the 

arbitrator because of the disclosure.42

Finally, if the party that made the 

request to remove the arbitrator timely 

files a motion for removal of the 

arbitrator based on the disclosure, the 

proposed rule change would provide 

that, absent extraordinary 

circumstances, the Director shall grant 

the motion.43

Disclosure of a party’s request to 

remove an arbitrator could prejudice the 

arbitrator or create the appearance of 

bias against the requesting party. FINRA 

recognizes the importance to the 

fairness and credibility of the DRS 

arbitration forum of having processes 

that are—and that are perceived to be— 

operated in a fair and neutral manner. 

As a result, FINRA believes it is 

appropriate to prohibit a party from 

disclosing an opposing party’s request 

to remove an arbitrator. Although DRS 

currently advises the parties by letter 

that they may not inform the panel of 

an opposing party’s causal challenge, 

FINRA believes that aligning the Codes 

with DRS’s guidance would more 

effectively curb the disclosure of a 

party’s request to remove an arbitrator 

because parties will be incented to 

comply with the Codes. 

Furthermore, FINRA believes that, in 

the event a party improperly discloses 

an opposing party’s causal challenge, it 

is appropriate to require that the 

requesting party either make a motion 

for removal of the arbitrator within five 

days of being made aware of the 

disclosure or forfeit the opportunity to 

request removal of the arbitrator. By 

requiring that any motion to remove an 

arbitrator be made within five days, the 

proposed rule change would strike the 

right balance between providing an 

opportunity for any aggrieved party to 

seek a remedy while, at the same time, 

allowing for the efficient processing of 

the proceeding. 


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44See Securities Exchange Act Release No. 81572 

(September 11, 2017), 82 FR 43436 (September 15, 

2017) (Order Approving File No. SR–FINRA–2017– 

025). 

45See FINRA Rule 13100(r). 

46See Securities Exchange Act Release No. 74383 

(February 26, 2015), 80 FR 11695 (March 4, 2015) 

(Order Approving File No. SR–FINRA–2014–028). 

47 15 U.S.C. 78o–3(b)(6). 

48Among the 1,104 public arbitrators who are 

chair-qualified, 187 public arbitrators are chairqualified but currently unwilling to serve as 

chairpersons. Similar to public arbitrators who are 

not chair-qualified, chair-qualified public 

arbitrators who are unwilling to serve as 

chairperson would have only one chance to be 

selected for Public Lists. 

49 Due to data limitations, the number of chairqualified public arbitrators that we identify as 

appearing on Public Lists would include public 

arbitrators who were previously qualified and 

willing to serve as chairpersons but subsequently 

Continued 

I. Updating Cross-References to the NonPublic Arbitrator Definition in the 

Industry Code 

FINRA Rules 13406(c) and 13411(d) 

cross-reference to FINRA Rule 13100(r), 

which provides the definition of ‘‘nonpublic arbitrator.’’ Prior to 2017, 

paragraphs (r)(1), (r)(2), (r)(3), and (r)(4) 

of FINRA Rule 13100 listed the specific 

criteria for inclusion on FINRA’s nonpublic arbitrator roster. However, in 

2017, FINRA amended the non-public 

arbitrator definition to eliminate 

paragraphs (r)(1) through (r)(4).44 As a 

result of this amendment, FINRA Rule 

13100(r) currently defines a ‘‘non-public 

arbitrator’’ as a person who is otherwise 

qualified to serve as an arbitrator, and 

is disqualified from service as a public 

arbitrator under FINRA Rule 13100(x).45

FINRA Rule 13100(x), in turn, lists the 

criteria for exclusion from FINRA’s 

public arbitrator roster for a person who 

is otherwise qualified to serve as an 

arbitrator.46 The proposed rule change 

would update FINRA Rules 13406(c) 

and 13411(d) with the correct crossreferences to FINRA Rule 13100(x)(2) 

through (11) to provide the necessary 

clarification in light of the amended 

definition of a ‘‘non-public arbitrator.’’ 

If the Commission approves the 

proposed rule change, FINRA will 

announce the effective date of the 

proposed rule change in a Regulatory 

Notice. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,47 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. 

FINRA believes that the proposed rule 

change will protect investors and the 

public interest by enhancing arbitrator 

list selection in the DRS arbitration 

forum. By increasing the opportunity for 

public arbitrators who are not chairqualified to be selected for Public Lists, 

the proposed rule change will increase 

the likelihood that these arbitrators, 

who are often new to the arbitrator 

roster or less experienced arbitrators, 

may be selected to serve as panelists. As 

a result, the proposed rule change will 

help DRS retain new or less experienced 

arbitrators on its arbitrator roster and 

expand the number of local public 

arbitrators who are chair-qualified to 

address shortages in local hearing 

locations. 

The proposed rule change also will 

protect investors and the public interest 

by codifying certain practices that DRS 

has developed to efficiently administer 

arbitrator list selection, establishing new 

timeframes for objecting to requests for 

additional information from arbitrators, 

withdrawing such requests for 

additional information, and filing 

motions to remove arbitrators after 

disclosures of causal challenges, and 

aligning provisions of the Codes related 

to the expungement of customer dispute 

information. Together, these proposed 

changes will increase the transparency 

and efficiency of the arbitration process 

for forum users. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

Economic Impact Assessment 

FINRA has undertaken an economic 

impact assessment to analyze the 

regulatory need for the proposed rule 

change, its potential economic impacts, 

including anticipated costs, benefits, 

and distributional and competitive 

effects, relative to the current baseline, 

and the alternatives FINRA considered 

in assessing how best to meet FINRA’s 

regulatory objectives. FINRA does not 

expect that the proposed rule change 

would affect the advantages and costs of 

the DRS arbitration forum relative to 

other arbitration fora. 

i. Regulatory Need 

FINRA is concerned that non-chairqualified public arbitrators have 

disproportionately fewer opportunities 

than chair-qualified public arbitrators to 

be selected for arbitrator lists. The 

proposed rule change is anticipated to 

address this imbalance by increasing the 

number of opportunities for non-chairqualified public arbitrators to be 

selected for Public Lists. Also, FINRA is 

concerned that some parties are not 

familiar with the current practices and 

published guidance for arbitrator list 

selection. The proposed rule change 

would increase the transparency and 

efficiency of the arbitrator list selection 

process by codifying certain practices 

that DRS has developed to efficiently 

administer arbitrator list selection, 

establishing new timeframes for 

objecting to requests for additional 

information from arbitrators, 

withdrawing such requests for 

additional information, and filing 

motions to remove arbitrators after 

disclosures of causal challenges, and 

aligning provisions of the Codes related 

to the expungement of customer dispute 

information. 

ii. Economic Baseline 

In general, the economic baseline for 

the proposed rule change consists of the 

current provisions under the Codes, 

current practices, and published 

guidance that address arbitrator list 

selection. Relevant features of the 

economic baseline are described below. 

The proposed rule change is expected to 

affect the parties to cases in the DRS 

arbitration forum and the arbitrators on 

the FINRA public arbitrator roster. 

As of January 2024, there were 4,072 

arbitrators on the FINRA public 

arbitrator roster. The public arbitrator 

roster consists of 1,104 public 

arbitrators who are chair-qualified (27 

percent = (1,104/4,072)) and 2,968 

public arbitrators who are non-chairqualified (73 percent = (2,968/4,072)).48

Chair-qualified public arbitrators 

appeared relatively more frequently on 

Chairperson Lists and Public Lists 

combined. Between January 2018 and 

December 2023 (‘‘sample period’’), 

17,544 arbitrations were filed and 

closed. Chairperson Lists and Public 

Lists were generated in 9,598 of the 

17,544 arbitrations that involved 

customer disputes with three arbitrators 

or industry disputes involving 

associated persons with three 

arbitrators. Chair-qualified public 

arbitrators appeared 143,381 times 

(99,773 appearances on Chairperson 

Lists and 43,608 appearances on Public 

Lists) and non-chair-qualified public 

arbitrators appeared 92,356 times on 

Public Lists only. Thus, with their 

additional opportunity to appear on 

Public Lists, chair-qualified public 

arbitrators made 61 percent (= 143,381/ 

(143,381 + 92,356)) of appearances but 

make up just 27 percent of all public 

arbitrators.49


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ceased being qualified or willing to serve as 

chairpersons when the Public Lists were generated. 

These arbitrators would have only one chance to be 

selected for Public Lists. See supra note 48. The 61 

percent of appearances made by chair-qualified 

public arbitrators, therefore, overstates the actual 

percentage and represents an upper bound for the 

estimate. 

50See, e.g., supra Section II. (Proposed 

Amendments to the Procedures for Generating 

Public Lists) (discussing FINRA’s observations as to 

why parties may prefer chair-qualified public 

arbitrators). 

51To calculate the percentage increase in the 

appearances by non-chair-qualified public 

arbitrators, FINRA assumes that the number of 

appearances is proportional to the pools of public 

arbitrators available to appear on a Public List. 

FINRA calculates the 68 percent as the number of 

appearances by non-chair-qualified public 

arbitrators divided by the total number of 

appearances of non-chair-qualified and chairqualified public arbitrators (= 92,356/(92,356 + 

43,608)). FINRA estimates the 81 percent by 

doubling the number of appearances by non-chairqualified public arbitrators (from 92,356 to 184,712) 

and recalculating (81 percent = 184,712/(184,712 + 

43,608)). 52See supra note 9 and accompanying text. 

53See proposed FINRA Rules 12407(d)(1) and 

13410(d)(1). 

54See proposed FINRA Rules 12407(d)(2) and 

13410(d)(2). 

Relative to non-chair-qualified public 

arbitrators, a higher percentage of chairqualified public arbitrators are selected 

by parties from Public Lists.50 Chairqualified public arbitrators were 

selected by parties in 16 percent of the 

times they made appearances on Public 

Lists (6,860 of 43,608 appearances) and 

non-chair-qualified public arbitrators 

were selected by parties in 10 percent of 

the times they made appearances on 

Public Lists (9,411 of 92,356 

appearances). Selection by parties may 

encourage arbitrators to remain on the 

FINRA public arbitrator roster. For 

example, of all the non-chair-qualified 

public arbitrators who left the roster 

during the sample period, the median 

time in the forum for those who were 

never appointed was five years while 

the median time for those who were 

appointed at least once was 10 years. 

Using appearances during the sample 

period as an estimate, the proposed rule 

change may increase the percentage of 

non-chair-qualified public arbitrators 

who appear on affected Public Lists 

from 68 percent to 81 percent.51 On a 

Public List with 15 arbitrators, this 

translates to two additional appearances 

by non-chair-qualified public 

arbitrators; and on a Public List with 10 

arbitrators, this translates to one 

additional appearance by non-chairqualified public arbitrators. 

The economic baseline for the 

proposed rule change also consists of 

the current practices and published 

guidance that address arbitrator 

selection. Relative to other parties, 

parties who are less familiar with 

current practices or published guidance 

may have greater difficulty 

understanding their options when 

selecting arbitrators. As a result, 

arbitrator panels may reflect the 

preferences of these parties less closely 

than would occur otherwise. 

iii. Economic Impact 

FINRA anticipates that, over time, the 

proposed rule change would increase 

the likelihood for non-chair-qualified 

public arbitrators to be selected by 

parties to serve as panelists. The 

benefits to arbitrators from selection 

include the experience, networking 

opportunities, and supplemental 

income. The benefits also include an 

increased likelihood of being selected in 

future arbitrations if, over time, parties 

become confident in the quality of 

arbitrators’ decision-making or are better 

able to predict how arbitrators may react 

to a specific fact pattern. Future 

selections may incent non-chairqualified public arbitrators to take 

necessary steps to remain on FINRA’s 

roster of arbitrators. For some non-chairqualified public arbitrators, the benefits 

from the additional selections may 

include obtaining the experience 

necessary to become chair-qualified.52

A larger pool of chair-qualified public 

arbitrators also may increase the 

availability of chair-qualified public 

arbitrators in the same general 

geographic area as parties (and who may 

be familiar with local laws and 

practices), help facilitate scheduling, 

and reduce arbitrator travel expenses 

incurred by the DRS arbitration forum. 

Currently, 78 percent of the 69 hearing 

locations have fewer than the requisite 

number of local chair-qualified public 

arbitrators to complete Chairperson 

Lists. In over half of these hearing 

locations, the roster of local chairqualified public arbitrators could be 

filled by non-chair-qualified public 

arbitrators if they became chairqualified. 

In general, an increase in the selection 

of non-chair-qualified public arbitrators 

would tend to reduce the average level 

of experience of arbitration panels. This 

could lessen the ability of some parties 

to anticipate awards. With a shorter 

award history, some parties may be less 

able to predict how an arbitrator might 

react to a specific fact pattern. Parties 

with preferences for more experienced 

public arbitrators may feel constrained 

by having fewer chair-qualified public 

arbitrators from which to choose. In 

addition, chair-qualified public 

arbitrators may not experience the same 

level of benefits over time from 

remaining active in the forum as the 

likelihood of their selection from Public 

Lists decreases. 

The magnitude of the economic 

impact, including the eventual impact 

on the combined forum experience of 

arbitrators who are selected for panels, 

is dependent on the preferences of 

parties for chair-qualified public 

arbitrators. For example, although fewer 

chair-qualified public arbitrators would 

appear on Public Lists, stronger 

preferences among parties for chairqualified public arbitrators and their 

continued selection from Public Lists 

would result in the proposed rule 

change having little impact relative to 

the baseline. As noted above, parties 

with preferences for more experienced 

public arbitrators may feel constrained 

by having fewer chair-qualified public 

arbitrators from which to choose. 

Parties’ selection of arbitrators, 

however, is dependent on multiple 

factors, including the lists that parties 

receive and their preferences for certain 

arbitrator characteristics. For this 

reason, FINRA does not believe that the 

proposed change to the Public List 

generation process would materially 

affect their decision to file a claim in the 

DRS arbitration forum (and not, for 

example, directly settling the dispute if 

the situation allows) or the number of 

claims filed in the forum. 

The proposed rule change would 

establish new timeframes for objecting 

to requests for additional information 

from arbitrators, withdrawing such 

requests for additional information, and 

filing motions to remove arbitrators after 

disclosures of causal challenges. The 

new timeframes would help the 

efficiency of the arbitration proceedings 

by ensuring that issues relating to 

arbitrator selection do not delay or 

disrupt the proceedings. As discussed 

above, the timeframes are consistent 

with those relating to similar motions 

and should therefore not impose an 

undue burden. 

The proposed rule change would 

align FINRA Rules to current guidance 

providing that at any stage of the 

arbitration proceeding, the Director may 

remove an arbitrator if all of the named 

parties agree in writing to the 

arbitrator’s removal.53 The proposed 

rule change would also add that parties 

may not agree to remove an arbitrator 

who is considering a request to expunge 

customer dispute information.54 The 

proposed rule change may help further 

ensure that arbitrators issue awards 

containing expungement relief only 

when appropriate and that the customer 

dispute information in CRD reflects the 


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Federal Register / Vol. 89, No. 249 / Monday, December 30, 2024 / Notices 106643 

55The proposed rule change would primarily 

affect expungement requests in non-simplified 

customer arbitrations. See supra notes 38 and 39 

and accompanying text (discussing existing 

requirements under the Codes for simplified 

arbitrations and straight-in requests). There were 

2,195 non-simplified customer arbitrations filed 

and closed between January 2018 and December 

2023 where parties requested expungement. 

Information is not available describing party 

agreements to remove arbitrators where parties 

requested expungement. 

56Other information describing the potential 

impact of the proposed amendments that address 

arbitrator selection under the baseline is not 

available. This information includes requests for 

additional time to complete ranked lists and grants 

or denials of these requests, objections to requests 

for additional information and withdrawals of these 

requests, and disclosures of challenges to remove 

arbitrators. 

57This estimate does not account for any 

potential changes in the behaviors of associated 

persons with respect to requesting expungement 

during a customer case in response to recently 

amended rules. See supra note 37 and 

accompanying text. 

conduct of associated persons.55 The 

inability to agree to remove an arbitrator 

may result in some associated persons 

choosing to forego requesting 

expungement in the DRS arbitration 

forum, though requesting expungement 

in the DRS arbitration forum may 

continue to be the preferred option. 

Associated persons who decide not to 

request expungement in the DRS 

arbitration forum may incur additional 

costs or delays in requesting 

expungement of the customer dispute 

information other than through the DRS 

arbitration forum. Associated persons 

who are delayed in requesting 

expungement may experience a loss of 

business and professional opportunities. 

Finally, the proposed rule change 

would codify current practices and DRS 

guidance relating to arbitrator selection. 

The codification may increase the 

efficient administration of the arbitrator 

selection process if it results in an 

increase in the transparency of the 

process and proves to be informative for 

parties who are unfamiliar with current 

practices or unaware of the DRS 

guidance. These parties may be more 

likely to resolve the dispute by filing a 

claim in the DRS arbitration forum. 

As best FINRA can determine, in the 

vast majority of sample cases, few cases 

would have been affected by the 

proposed rule change to align the Codes 

with current practices.56 For example, 

in the vast majority of sample cases, 

data suggests that the forum sends lists 

of arbitrators to the parties within 20 

days of when the last answer is due. 

FINRA can also identify 63 requests for 

additional information about a listed 

arbitrator in 38 cases (less than one 

percent of the 17,544 sample cases) and 

54 requests for additional information 

about an appointed arbitrator in 45 

cases. FINRA can also identify nine 

challenges to remove a listed arbitrator 

in nine cases, and 165 challenges to 

remove an appointed arbitrator in 132 

cases (one percent). Information 

describing the basis for challenges to 

remove a listed or appointed arbitrator 

(e.g., due to the disclosure of a causal 

challenge) is not available.57

While it is not known how many 

parties are unfamiliar with current 

practices or DRS guidance, FINRA 

believes that the small number of 

instances likely reflects informed 

decisions by most parties, and so the 

proposed rule change is therefore not 

likely to cause a large increase in the 

number of these instances. 

iv. Alternatives Considered 

FINRA developed the proposed 

amendments over a multi-year process 

during which FINRA considered and 

modified proposals based on feedback 

from forum users, including investors, 

securities industry professionals, and 

FINRA arbitrators. In evaluating 

proposals, FINRA considered numerous 

factors including efficiency, cost, 

fairness and transparency, and certain 

tradeoffs among these factors. 

The proposed amendments that relate 

to the generation of Public Lists strike 

an appropriate balance between leveling 

the opportunities for selection and 

minimizing the disruption to the 

selection process and its associated 

costs. As an alternative, FINRA 

considered amending the Codes to 

provide that, in preparing the Public 

List, the list selection algorithm would 

generate a list that includes a fixed 

number of non-chair-qualified public 

arbitrators. This would ensure that nonchair-qualified public arbitrators have a 

designated opportunity to appear on the 

Public List for selection. However, 

depending on list size, there is an 

insufficient number in approximately 

one-quarter to two-fifths of hearing 

locations of non-chair-qualified public 

arbitrators to fill Public Lists. Thus, for 

selected hearing locations with few 

arbitrators, the alternative may require 

generating Public Lists that include nonchair-qualified public arbitrators who 

live outside of the local hearing location 

to fill Public Lists. FINRA believes that 

the proposed rule change would 

increase the opportunity for non-chairqualified public arbitrators to be 

selected for the Public List, and will 

monitor the impact of the proposed rule 

change if approved by the Commission 

and continue to consider if additional 

changes are warranted. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) by order approve or disapprove 

such proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

FINRA–2024–022 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–FINRA–2024–022. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 


ddrumheller on DSK120RN23PROD with NOTICES1
106644 Federal Register / Vol. 89, No. 249 / Monday, December 30, 2024 / Notices 

58 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of 

FINRA. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–FINRA–2024–022 and should be 

submitted on or before January 21, 2025. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.58

J. Matthew DeLesDernier, 

Deputy Secretary. 

[FR Doc. 2024–30907 Filed 12–27–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

35425; File No. 812–15543] 

Morgan Stanley Direct Lending Fund, 

et al. 

December 19, 2024. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’ or ‘‘SEC’’). 

ACTION: Notice. 

Notice of application for an order 

under sections 17(d) and 57(i) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) and rule 17d–1 under the Act to 

permit certain joint transactions 

otherwise prohibited by sections 17(d) 

and 57(a)(4) of the Act and rule 17d–1 

under the Act. 

SUMMARY OF APPLICATION: Applicants 

request an order to permit certain 

business development companies 

(‘‘BDCs’’) and closed-end management 

investment companies to co-invest in 

portfolio companies with each other and 

with certain affiliated investment 

entities. 

APPLICANTS: Morgan Stanley Direct 

Lending Fund, MS Capital Partners 

Adviser Inc., NH Credit Partners III 

Holdings L.P., NH Expansion Credit 

Fund Holdings LP, North Haven Credit 

Partners II L.P., North Haven Credit 

Partners III L.P., North Haven Senior 

Loan Fund (ALMA) Designated Activity 

Company, North Haven Senior Loan 

Fund L.P., North Haven Senior Loan 

Fund Offshore L.P., North Haven Senior 

Loan Fund Unleveraged Offshore L.P., 

North Haven Tactical Value Fund (AIV) 

LP, North Haven Tactical Value Fund 

LP, North Haven Unleveraged Senior 

Loan Fund (Yen) L.P., NH Senior Loan 

Fund Offshore Holdings L.P., NH Senior 

Loan Fund Onshore Holdings LLC, DLF 

CA SPV LLC, DLF Equity Holdings LLC, 

DLF SPV LLC, DLF Financing SPV LLC, 

SL Investment Fund II LLC, SLIF II CA 

SPV LLC, SLIC CA SPV LLC, SLIC 

Equity Holdings LLC, SLIC Financing 

SPV LLC, T Series Middle Market Loan 

Fund LLC, T Series CA SPV LLC, T 

Series Equity Holdings LLC, T Series 

Financing SPV LLC, T Series Financing 

II SPV LLC, T Series Financing III SPV 

LLC, North Haven Private Income Fund 

LLC, North Haven Private Income Fund 

A LLC, LGAM Private Credit LLC, PIF 

CA SPV LLC, NHPIF Equity Holdings 

SPV LLC, Broadway Funding Holdings 

LLC, PIF Financing SPV LLC, PIF 

Financing II SPV LLC, PIF A CA SPV 

LLC, Broadway Funding Holdings II 

LLC, PIF A Financing SPV LLC, PIF A 

Equity Holdings LLC, 1585 Koala 

Holdings LLC, LGAM CA SPV LLC, 

LGAM Financing SPV LLC, LGAM 

Equity Holdings LLC, Credit 

Opportunities (Series M) LP, NH–G 

2022 SCSp, North Haven Senior Loan 

Fund (ALMA) II Designated Activity 

Company, North Haven Expansion 

Credit II L.P., North Haven Direct 

Lending Fund Aggregator L.P., NHDL I 

SPV LLC, North Haven Credit Partners 

IV Holdings A L.P., North Haven Credit 

Partners IV Holdings B L.P., North 

Haven Tactical Value Fund II Lux AIV– 

B SCSp, North Haven Tactical Value 

Fund II Lux AIV–C SCSp, NHTV II 

Onshore Aggregator LP, North Haven 

Structured Solutions Fund LP and 

Morgan Stanley Senior Funding, Inc. 

FILING DATES: The application was filed 

on January 29, 2024 and amended on 

August 20, 2024. 

HEARING OR NOTIFICATION OF HEARING: 

An order granting the requested relief 

will be issued unless the Commission 

orders a hearing. Interested persons may 

request a hearing on any application by 

emailing the SEC’s Secretary at 

Secretarys-Office@sec.gov and serving 

the Applicants with a copy of the 

request by email, if an email address is 

listed for the relevant Applicant below, 

or personally or by mail, if a physical 

address is listed for the relevant 

Applicant below. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on January 13, 2025 and 

should be accompanied by proof of 

service on the Applicants, in the form 

of an affidavit or, for lawyers, a 

certificate of service. Pursuant to rule 0– 

5 under the Act, hearing requests should 

state the nature of the writer’s interest, 

any facts bearing upon the desirability 

of a hearing on the matter, the reason for 

the request, and the issues contested. 

Persons who wish to be notified of a 

hearing may request notification by 

emailing the Commission’s Secretary at 

Secretarys-Office@sec.gov. 

ADDRESSES: The Commission: 

Secretarys-Office@sec.gov. Applicants: 

Orit Mizrachi, 1585 Broadway, 23rd 

floor, New York, NY 10036, with a copy 

to: Thomas Friedmann, Dechert LLP, 

One International Place, 100 Oliver St., 

40th Floor, Boston, MA 02110. 

FOR FURTHER INFORMATION CONTACT: 

Adam Lovell, Senior Counsel, or Terri 

Jordan, Branch Chief, at (202) 551–6825 

(Division of Investment Management, 

Chief Counsel’s Office). 

SUPPLEMENTARY INFORMATION: For 

Applicants’ representations, legal 

analysis, and conditions, please refer to 

Applicants’ amended and restated 

application, dated August 20, 2024, 

which may be obtained via the 

Commission’s website by searching for 

the file number at the top of this 

document, or for an Applicant using the 

Company name search field, on the 

SEC’s EDGAR system. The SEC’s 

EDGAR system may be searched at, 

https://www.sec.gov/edgar/searchedgar/ 

legacy/companysearch.html. You may 

also call the SEC’s Public Reference 

Room at (202) 551–8090. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

J. Matthew DeLesDernier, 

Deputy Secretary. 

[FR Doc. 2024–30857 Filed 12–27–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101999; File No. SR– 

CboeBYX–2024–049] 

Self-Regulatory Organizations; Cboe 

BYX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend Its 

Fees Schedule Related to Physical 

Port Fees 

December 19, 2024. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 


ddrumheller on DSK120RN23PROD with NOTICES1