Document ID: SEC-2014-1702-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2014-10-07T04:00Z

[Federal Register Volume 79, Number 194 (Tuesday, October 7, 2014)]
[Notices]
[Pages 60556-60560]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-23836]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73277; File No. SR-FINRA-2014-028]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Instituting Proceedings To Determine Whether To 
Approve or Disapprove Proposed Rule Change Relating to Revisions to the 
Definitions of Non-Public Arbitrator and Public Arbitrator

October 1, 2014.

I. Introduction

    On June 17, 2014, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act

[[Page 60557]]

of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule 
change to amend provisions in the FINRA rulebook to ``refine and 
reorganize the definitions of `non-public arbitrator' and `public 
arbitrator.' '' \3\ The proposed rule change was published for comment 
in the Federal Register on July 3, 2014.\4\ On August 4, 2014, FINRA 
extended the time period in which the Commission must approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to approve or disapprove the proposed 
rule change to October 1, 2014. The Commission received three hundred 
sixteen (316) comment letters in response to the proposed rule 
change.\5\ On September 30, 2014, the Commission received a letter from 
FINRA responding to the comment letters.\6\ The Commission is 
publishing this order to institute proceedings pursuant to Section 
19(b)(2)(B) of the Act \7\ to determine whether to approve or 
disapprove the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Release No. 34-72491 (Jun. 27, 2014), 79 FR 38080 (Jul. 
3, 2014) (Notice of Filing of Proposed Rule Change Relating to 
Revisions to the Definitions of Non-Public Arbitrator and Public 
Arbitrator) (``Notice of Filing'').
    \4\ Id. The comment period closed on July 24, 2014.
    \5\ Of the 316 letters, 21 were unique letters, and 295 of the 
letters followed a form designated as the ``Type A'' letter, 
submitted by self-identified independent financial advisors 
(``independent financial advisors'') (``Type A Letter''). The unique 
letters were submitted by: Philip M. Aidikoff, Aidikoff, Uhl & 
Bakhtiari, dated July 1, 2014 (``Aidikoff Letter''); Steven B. 
Caruso, Esq., Maddox Hargett & Caruso, P.C., dated July 1, 2014 
(``Caruso Letter''); Ryan K. Bakhtiari, Aidikoff, Uhl and Bakhtiari, 
dated July 2, 2014 (``Bakhtiari Letter''); Richard A. Stephens, 
Attorney at Law, dated July 6, 2014 (``Stephens Letter''); Daniel E. 
Bacine, Barrack, Rodos & Bacine, dated July 18, 2014 (``Bacine 
Letter''); Blossom Nicinski, dated July 20, 2014 (``Nicinski 
Letter''); Christopher L. Mass, dated July 21, 2014 (``Mass 
Letter''); Glenn S. Gitomer, McCausland Keen & Buckman, dated July 
23, 2014 (``Gitomer Letter''); Kevin M. Carroll, Managing Director 
and Associate General Counsel, Securities Industry and Financial 
Markets Association, dated July 24, 2014 (``SIFMA Letter''); J. 
Burton LeBlanc, President, American Association for Justice, dated 
July 24, 2014 (``AAJ Letter''); George H. Friedman, Esquire, George 
H. Friedman Consulting, LLC, dated July 24, 2014 (``Friedman 
Letter''); Andrea Seidt, President, North American Securities 
Administrators Association, and Ohio Securities Commissioner, dated 
July 24, 2014 (``NASAA Letter''); CJ Croll, Student Intern, Elissa 
Germaine, Supervising Attorney, and Jill I. Gross, Director, 
Investor Rights Clinic at Pace Law School, dated July 24, 2014 
(``PIRC Letter''); Jason Doss, President, Public Investors 
Arbitration Bar Association, dated July 24, 2014 (``PIABA Letter''); 
David T. Bellaire, Esq., Executive Vice President & General Counsel, 
Financial Services Institute, dated July 24, 2014 (``FSI Letter''); 
Richard P. Ryder, Esq., President, Securities Arbitration 
Commentator, Inc., dated July 24, 2014 (``SAC Letter''); Gary N. 
Hardiman, dated July 24, 2014 (``Hardiman Letter''); Thomas J. 
Berthel, CEO, Berthel Fisher & Company, dated July 24, 2014 
(``Berthel Letter''); Robert Getman, dated July 28, 2014 (``Getman 
Letter''); Barry D. Estell, Attorney at Law (retired), dated August 
13, 2014 (``Estell Letter''); and Walter N. Vernon III, Esq., dated 
August 21, 2014 (``Vernon Letter'').
    \6\ Letter from Margo A. Hassan, Assistant Chief Counsel, FINRA 
Dispute Resolution, to Brent J. Fields, Secretary, SEC, dated 
September 30, 2014 (``FINRA Letter'').
    \7\ 15 U.S.C. 78s(b)(2)(B).
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    Institution of proceedings does not indicate that the Commission 
has reached any conclusions with respect to the proposed rule change, 
nor does it mean that the Commission will ultimately disapprove the 
proposed rule change. Rather, as discussed below, the Commission seeks 
additional input from interested parties on the issues presented by the 
proposal.

II. Description of the Proposed Rule Change

    Currently, FINRA Rule 12100(p) of the Code of Arbitration Procedure 
for Customer Disputes (``Customer Code'') and FINRA Rule 13100(p) of 
the Code of Arbitration Procedure for Industry Disputes (``Industry 
Code'') (collectively, ``Codes'') define the term ``non-public 
arbitrator;'' and FINRA Rule 12100(u) of the Customer Code and Rule 
13100(u) of the Industry Code'' define the term ``public arbitrator.'' 
\8\ In general, the Codes classify arbitrators as ``non-public'' or 
``public'' based on their professional and personal affiliations. 
Individuals affiliated with the financial industry are typically 
considered ``non-public arbitrators.'' Individuals unaffiliated with 
the financial industry are typically considered ``public arbitrators.'' 
\9\
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    \8\ Where this order refers only to rules in the Customer Code, 
please note that the changes and discussion would also apply to the 
same rules of the Industry Code.
    \9\ Notice of Filing.
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    FINRA is now proposing to amend the Codes to revise and reorganize 
the definitions of ``non-public arbitrator'' and ``public arbitrator.'' 
The amendments would, among other matters, provide that persons who 
worked in the financial industry for any duration during their careers 
would always be classified as non-public arbitrators. The amendments 
would also provide that persons who represent investors or the 
financial industry as a significant part of their business would also 
be classified as non-public arbitrators, but could become public 
arbitrators after a cooling-off period. The amendments would also 
reorganize the definitions to make it easier for arbitrator applicants 
and parties, among others, to determine the correct arbitrator 
classification.\10\
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    \10\ Id.
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    The text of the proposed rule change is available, at the principal 
office of FINRA, on FINRA's Web site at http://www.finra.org, and at 
the Commission's Public Reference Room. In addition, you may also find 
a more detailed description of the proposed rule changes in the Notice 
of Filing.\11\
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    \11\ See supra note 3.
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III. Summary of Comments

    Five of the commenters expressed support for the proposed rule 
change in its entirety.\12\ Two commenters opposed the proposed rule 
change in its entirety.\13\ The other commenters (including the 
independent financial advisors) generally supported the proposed rule 
change in part, but raised concerns about various aspects of the 
proposal (discussed below).
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    \12\ See Aidikoff Letter, Bakhtiari Letter, Caruso Letter, 
Gitomer Letter, and SIFMA Letter.
    \13\ See SAC Letter and Friedman Letter. The SAC Letter 
indicates that the proposed rule should be disapproved until a cost-
benefit analysis is provided. The Friedman Letter indicates that 
FINRA should ``go back to the drawing board.''
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A. Permanent Classification of Industry Employees as Non-Public 
Arbitrators

    In general, the proposal would result in the permanent 
classification (or reclassification of current public arbitrators) of 
individuals who worked in the financial industry (a) in any capacity, 
(b) at any point, and (c) for any duration, (``Industry Affiliates'') 
as non-public arbitrators. Many commenters opposed the permanent 
classification of Industry Affiliates as non-public arbitrators for 
varying reasons.\14\
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    \14\ See e.g., Type A Letter, FSI Letter, Getman Letter, and 
Vernon Letter.
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1. Elimination of the Cooling-Off Period
    Six commenters supported this provision as providing a workable 
``bright-line'' test that would address criticism regarding bias 
(perceived or actual) in favor of industry.\15\
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    \15\ See Aidikoff Letter; see also Bakhtiari Letter, SIFMA 
Letter, NASAA Letter, PIABA Letter, and AAJ Letter.
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    Many commenters opposed the elimination of the five-year cooling-
off period for Industry Affiliates.\16\ For instance, some commenters 
expressed concern that eliminating the cooling-off period could exclude 
arbitrators with industry experience who could be useful on a panel to, 
among other things, educate the other panelists on industry 
practice.\17\ Two other commenters who opposed the proposed elimination 
of the cooling-off period suggested that FINRA should adopt a 
proportional cooling-off period for industry employees that would be

[[Page 60558]]

proportional to the number of years they were Industry Affiliates.\18\
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    \16\ See e.g., Type A Letter, FSI Letter, Getman Letter, Berthel 
Letter and Vernon Letter.
    \17\ See Type A Letter and Berthel Letter; see also FSI Letter.
    \18\ See PIRC Letter and FSI Letter.
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    In its response, FINRA stated that investor advocates have a stated 
preference for using expert witnesses and making their own arguments 
rather than relying on members of the arbitration panel that have 
industry experience to explain and influence matters. It also indicated 
that its constituents agreed that a cooling off period for financial 
industry employees would ``always leave a perception of unfairness for 
some advocates.'' \19\ In addition, FINRA stated that it is more 
workable and preferable to use a bright-line test than a pro rata 
cooling-off period for industry employees. For these reasons, FINRA 
declined to amend the proposal as suggested.\20\
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    \19\ See FINRA Letter.
    \20\ See FINRA Letter.
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2. All Employees, Regardless of Capacity, To Be Categorized as Non-
Public Arbitrators
    Four commenters stated that, as proposed, the rule would improperly 
characterize certain individuals without true financial industry 
experience as non-public arbitrators.\21\ One of these commenters 
expressed concern that individuals performing solely clerical or 
ministerial functions for a financial industry firm would be classified 
as non-public arbitrators because they would be considered ``associated 
persons'' as defined by Rule 12100(p).\22\ Accordingly, this commenter 
suggested FINRA amend the definition of the term ``associated person'' 
in the proposal to track the language of the definition of the term 
``associated person'' in Section 3(a)(18) of the Act, which excludes 
individuals performing solely clerical or ministerial functions. 
Another commenter suggested that the proposal should only classify 
individuals who ``worked for [a financial industry firm] in a capacity 
for which testing and registration is required'' as non-public 
arbitrators to address this concern.\23\
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    \21\ See Stephens Letter, FSI Letter, Getman Letter, and Vernon 
Letter.
    \22\ See Stephens Letter.
    \23\ See Vernon Letter (expressing concern that under the 
proposal he could be characterized as a non-public arbitrator based 
solely on his capacity as a ``trainee'' for Merrill Lynch in 1983).
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    In its response letter, FINRA stated that its staff believes that 
``investor concerns about the neutrality of the public roster apply to 
all industry employees, including those who serve in clerical or 
ministerial positions.'' Accordingly, FINRA declined to amend the 
proposed rule change.\24\
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    \24\ See FINRA Letter.
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B. Classification of Professionals

1. Classifying Investor Advocates as Non-Public Arbitrators
    In general, the proposed rule change would classify attorneys, 
accountants, expert witnesses, or other professionals who (a) devote 20 
percent or more of their professional time (b) in any single calendar 
year within the past five calendar years (c) to representing or 
providing services to parties in disputes concerning investment 
accounts or transactions, or employment relationships within the 
industry (``Investor Advocates'') as non-public arbitrators. Currently, 
individuals meeting this description are classified as public 
arbitrators.
    Three commenters supported this provision.\25\
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    \25\ See SIFMA Letter (stating that the proposal ``strike[s] an 
appropriate balance in the interests of fairness, perceptions of 
fairness, and arbitrator neutrality for all parties''), FSI Letter, 
and Bethel Letter. In addition to these three letters, the 
commenters who used the Type A Letter also supported this provision.
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    Eight commenters opposed this provision.\26\ In general, they 
stated that the distinction between the public and non-public 
arbitrators has always been based on whether the arbitrators had 
industry experience and argued for keeping this distinction.\27\ 
Similarly, some of these commenters noted that the proposal would 
create confusion since that U.S. courts, the American Arbitration 
Association, and the general public generally view professionals who 
represent investors to be ``public arbitrators.'' \28\ One commenter 
noted that past NASD response letters, as well as the FINRA Web site, 
also make this distinction.\29\
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    \26\ See NASAA Letter, PIABA Letter, Stephens Letter, PIRC 
Letter, Bacine Letter, Mass Letter, Hardiman Letter, and Friedman 
Letter.
    \27\ See PIRC Letter, Bacine Letter, and Friedman Letter. See 
also NASAA Letter (arguing that FINRA should classify as non-public 
arbitrators only persons ``representing or providing services to 
non-retail parties in disputes concerning investment accounts or 
transactions, or employment relationships within the financial 
industry''); PIABA Letter (arguing that there is no need or basis 
for classifying Investor Advocates as non-public arbitrators because 
FINRA has no evidence to support the conclusion that they are biased 
for or against the securities industry); Stephens Letter (arguing 
that FINRA should only classify as non-public arbitrators only 
persons ``. . . representing or providing services to parties in 
disputes [other than customers] concerning investment accounts . . 
.''); Mass Letter (asserting that lawyers who represent investors or 
claimants are public arbitrators because they work on behalf of the 
public at large against industry); and Hardiman Letter (stating that 
classifying Investor Advocates as non-public arbitrators would be 
``burying professionals who represent the investing public in the 
industry non-public side'').
    \28\ See e.g., Stephens Letter, NASAA Letter, PIABA Letter, PIRC 
Letter, and Bacine Letter.
    \29\ See PIRC Letter.
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    In its response letter, FINRA noted that industry constituents have 
expressed concern about the neutrality of the public arbitrator roster 
because of the presence on the roster of Investor Advocates. 
Specifically, FINRA stated that these industry constituents believe 
that Investor Advocates should not serve as public arbitrators. FINRA 
further stated that it designed the proposal to address this concern by 
classifying these individuals as non-public arbitrators thereby 
excluding them from the public arbitrator roster. Accordingly, FINRA 
declined to amend the proposed rule change.\30\
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    \30\ See FINRA Letter.
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2. Five-Year Cooling-Off Period for Professionals Representing Industry
    In general, the proposed rule change would extend the cooling-off 
period from two years to five years for attorneys, accountants, expert 
witnesses, or other professionals who (a) devote 20 percent or more of 
their professional time (b) in any single calendar year within the past 
five calendar years (c) to representing or providing services to 
financial industry firms (``Industry Advocates'').
    Four commenters generally supported this provision as fair and 
acknowledged the consistency of approach towards professionals 
representing investors and those representing industry.\31\ One 
commenter opposed this provision of the proposal.\32\ In particular, 
this commenter stated that Industry Advocates should be permanently 
classified as non-public arbitrators like financial industry employees 
(i.e., the commenter suggested that FINRA eliminate the cooling-off 
period rather than lengthening it).\33\
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    \31\ See SIFMA Letter, NASAA Letter, PIABA Letter, and Berthel 
Letter.
    \32\ See NASAA Letter.
    \33\ Id.; but see SIFMA Letter, NASAA Letter, PIABA Letter, and 
Berthel Letter (each letter generally supporting this provision of 
the proposal as fair and acknowledging the consistent approach 
towards Investor Advocates and Industry Advocates).
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    In its response letter, FINRA stated that it has drawn a 
distinction between individuals who work in the financial industry and 
individuals who provide services to the financial industry. It also 
believes that it needed to take a consistent approach to cooling-off 
periods for service providers to both investors and the financial 
industry. Accordingly, FINRA declined to amend the proposed rule 
change.\34\
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    \34\ See FINRA Letter.

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[[Page 60559]]

3. Using Professional Time To Quantify Professional Work
    As stated above, the proposal would classify attorneys, 
accountants, expert witnesses, or other professionals as either public 
arbitrators or non-public arbitrators depending on, among other things, 
the amount of time those individuals devoted to representing either the 
financial industry or investors. One commenter opposed this provision 
of the proposal.\35\ Specifically, this commenter questioned the 
appropriateness of classifying individuals as public or non-public 
arbitrators based on the ``amount of time'' an individual devotes to a 
client. Alternatively, this commenter suggested FINRA base this 
determination on the amount of revenue generated by the professional 
relationship. The commenter believes that revenue is a better 
measurement since not all professionals track their work in terms of 
time, but all professionals would have a record of revenue.\36\
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    \35\ See PIRC Letter.
    \36\ Id.
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    In its response letter, FINRA stated that it discussed this matter 
with its National Arbitration and Mediation Committee (``NAMC''). FINRA 
stated that based on these discussions, FINRA believes that using the 
term ``professional time'' ``added clarity to the rule text, was 
simpler to apply, and would result in more accurate calculations by 
arbitrator applicants and arbitrators reviewing their business mix.'' 
\37\ Accordingly, FINRA declined to amend the proposed rule change.\38\
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    \37\ FINRA Letter.
    \38\ Id.
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C. Impact to the Number of Available Public Arbitrators

    Four commenters expressed concerns that the proposed rule change 
would reduce the number of public arbitrators to an amount that would 
be insufficient to meet future needs.\39\ One of these commenters 
stated that permanently classifying certain individuals as non-public 
arbitrators would negatively impact the effective administration of the 
FINRA arbitration forum.\40\ Two of these commenters expressed concern 
that the proposal would reduce the supply of available public 
arbitrators at a time when more claimants are selecting all-public 
panels.\41\ Another one of these commenters suggested that the 
potential shortages of public arbitrators may be more concentrated in 
some locations more than others.\42\ Two of these commenters also 
suggested that FINRA would need to devote resources to recruit 
additional public arbitrators.\43\
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    \39\ See Friedman Letter, SAC Letter, NASAA Letter, and FSI 
Letter.
    \40\ See FSI Letter; see also Bacine Letter (expressing concern 
that classifying professionals who provide services to customers as 
non-public arbitrators would negatively impact the quality of 
chairman-eligible arbitrators).
    \41\ See FSI Letter and Friedman Letter; see also Release No. 
34-63799 (Jan. 31, 2011); 76 FR 6500 (Feb. 4, 2011) (order approving 
a proposed rule change to provide customers with the option to 
choose an all-public arbitration panel in all cases); Release No. 
34-70442 (Sept. 18, 2013); 78 FR 58580 (Sept. 24, 2013) (order 
approving a proposed rule change to, among other things, permit all 
parties to select an all-public panel).
    \42\ See SAC Letter.
    \43\ See SAC Letter and NASAA Letter.
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    In its response letter, FINRA stated that, based on a preliminary 
analysis of its data, including a review of the public arbitrator 
roster, it estimated that approximately 474 arbitrators (out of 3,567) 
might be reclassified from public arbitrators to non-public arbitrators 
under the proposed rule change. FINRA also stated, however, that if the 
proposal was approved, it would conduct a more detailed analysis to 
determine whether additional arbitrator recruitment efforts were 
necessary in any particular geographic area and would deploy the 
necessary resources to avoid any undue delay in the arbitration 
process.\44\
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    \44\ See FINRA Letter.
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D. Cost-Benefit/More Data Intensive Analysis

    Three commenters stated that the proposed rule change should not be 
approved until FINRA obtained additional data and published a detailed 
cost-benefit analysis justifying the proposal.\45\ More specifically, 
two of these commenters expressed concern that the proposal would 
result in a reduction in the pool of public arbitrators and chair-
eligible arbitrators and suggested that FINRA seek additional data to 
analyze the likelihood of this outcome.\46\ Another one of these 
commenters suggested FINRA make information about each arbitrator 
publicly available, particularly to academic researchers.\47\ This 
commenter stated that this data could provide FINRA with statistical 
proof of bias or lack of bias upon which to base its proposal instead 
of relying on perceptions of bias.\48\
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    \45\ See SAC Letter, Friedman Letter, and Estell Letter.
    \46\ See SAC Letter (expressing concern that a decrease in the 
number of public arbitrators could result in greater delays in 
arbitrating claims, particularly (1) during declines in the 
financial markets (when the number of arbitration claims filed 
increases) or (2) in certain hearing locations with smaller rosters 
of arbitrators) and Friedman Letter.
    \47\ See Estell Letter.
    \48\ Id.
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    In its response letter, FINRA stated that a cost-benefit analysis 
would be helpful, but would require a survey of every public arbitrator 
on its roster and that such a review would be time-intensive. As an 
interim step, FINRA performed a preliminary analysis of databases 
currently available to it. FINRA also stated that if the proposal was 
approved, it would conduct a more robust cost-benefit analysis.\49\
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    \49\ See FINRA Letter.
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E. General Comments

    Two commenters suggested alternatives to characterizing arbitrators 
as either public or non-public.\50\ Two other commenters objected to 
broker-dealers' used of pre-dispute mandatory arbitration 
agreements.\51\ Other commenters suggested ways to improve the quality 
of arbitration panels.\52\ Another commenter suggested that FINRA's 
Arbitration Task Force \53\ should review the proposal.\54\
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    \50\ See Friedman Letter (suggesting the following categories: 
(1) Affiliated with the financial industry, (2) not affiliated with 
the financial industry, and (3) a ``no-man's land,'' which would 
preclude an individual from acting as an arbitrator); and Nicinski 
Letter (suggesting the discontinuance of all categories of 
arbitrators).
    \51\ See AAJ Letter and Estell Letter.
    \52\ See e.g., Nicinski Letter (recommending that arbitrators be 
required to display some knowledge of the investment products likely 
to be discussed during an arbitration); and Berthel Letter 
(recommending (1) that every panel include arbitrators with a strong 
background in securities laws and (2) that the Chair be a judge or 
hold a law degree).
    \53\ See FINRA News Release, FINRA Announces Arbitration Task 
Force (Jul. 17, 2014), available at http://www.finra.org/Newsroom/NewsReleases/2014/P554192 (announcing the formation of an 
Arbitration Task Force to consider possible enhancements to improve 
transparency, impartiality and efficiency of FINRA's securities 
arbitration forum for all participants).
    \54\ See Friedman Letter.
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    In its response letter, FINRA stated that each of these suggestions 
was either outside the scope of, or would cause undue delay to, the 
proposed rule change. Accordingly, FINRA declined to amend the proposed 
rule change.\55\
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    \55\ See FINRA Letter.
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IV. Proceedings To Determine Whether To Approve or Disapprove SR-FINRA-
2014-028 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act to determine whether the proposed rule change 
should be approved or disapproved.\56\

[[Page 60560]]

Institution of such proceedings appears appropriate at this time in 
view of the legal and policy issues raised by the proposal. As noted 
above, institution of proceedings does not indicate that the Commission 
has reached any conclusions with respect to any of the issues involved. 
Rather, the Commission seeks and encourages interested persons to 
comment on the issues presented by the proposed rule change and provide 
the Commission with arguments to support the Commission's analysis as 
to whether to approve or disapprove the proposal.
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    \56\ 15 U.S.C. 78s(b)(2). Section 19(b)(2)(B) of the Act 
provides that proceedings to determine whether to disapprove a 
proposed rule change must be concluded within 180 days of the date 
of publication of notice of the filing of the proposed rule change. 
The time for conclusion of the proceedings may be extended for up to 
an additional 60 days if the Commission finds good cause for such 
extension and publishes its reasons for so finding or if the self-
regulatory organization consents to the extension.
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    Pursuant to Section 19(b)(2)(B) of the Act,\57\ the Commission is 
providing notice of the grounds for disapproval under consideration. In 
particular, Section 15A(b)(6) of the Act \58\ 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. In addition, Section 15A(b)(9) of the Act \59\ 
requires that FINRA rules not impose any unnecessary or inappropriate 
burden on competition.
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    \57\ 15 U.S.C. 78s(b)(2)(B).
    \58\ 15 U.S.C. 78o-3(b)(6).
    \59\ 15 U.S.C. 78o-3(b)(9).
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    The Commission believes FINRA's proposed rule change raises 
questions as to whether it is consistent with the requirements of 
Sections 15A(b)(6) and 15A(b)(9) of the Act.

V. Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues raised by the proposed rule change. In particular, the 
Commission invites the written views of interested persons on whether 
the proposed rule change is inconsistent with Sections 15A(b)(6) and 
15A(b)(9), or any other provision, of the Act, or the rules and 
regulations thereunder.
    Although there do not appear to be any issues relevant to approval 
or disapproval that would be facilitated by an oral presentation of 
views, data, and arguments, the Commission will consider, pursuant to 
Rule 19b-4, any request for an opportunity to make an oral 
presentation.\60\
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    \60\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Pub. L. 94-29, 89 Stat. 97 (1975), grants 
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is 
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975, 
Report of the Senate Committee on Banking, Housing and Urban Affairs 
to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess. 30 
(1975).
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    Interested persons are invited to submit written data, views, and 
arguments by November 6, 2014 concerning whether the proposed rule 
change should be approved or disapproved. Any person who wishes to file 
a rebuttal to any other person's submission must file that rebuttal by 
November 21, 2014. 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-2014-028 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-2014-028. 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 Web site (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 
provisions of 5 U.S.C. 552, will be available for Web site 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 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principle office of FINRA. All 
comments received will be posted without change. The Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make publicly available. All 
submissions should refer to File Number SR-FINRA-2014-028 and should be 
submitted on or before November 6, 2014. If comments are received, any 
rebuttal comments should be submitted by November 21, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\61\
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    \61\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(57).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-23836 Filed 10-6-14; 8:45 am]
BILLING CODE 8011-01-P