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Wall Street Arbitration “Going Public” but FINRA Owes America A Lot More Than That

Posted by Larry Doyle on September 29, 2010 4:49 AM |

Those who care about truth, transparency, and integrity while navigating our financial markets and economic landscape won another round in our ongoing battle today. How so? As with any business, disputes and disagreements will always occur. How those disputes are adjudicated has always been a subject of much consternation on Wall Street and more so throughout America. Why? Many investors felt the mandated arbitration process disadvantaged investors against Wall Street firms because the arbitration panel has traditionally consisted solely of industry representatives. That standard went through a trial change. That trial change is now being proposed to be made permanent. Think Wall Street and FINRA are beginning to understand how America truly feels? Wall Street’s self-regulatory organization FINRA released the following statement today: 

WASHINGTON — The Financial Industry Regulatory Authority (FINRA) will file a rule proposal next month that would allow all investors filing arbitration claims the option of having an all-public panel, greatly increasing investor choice in the FINRA arbitration program. The rule proposal, which will be filed for approval with the Securities and Exchange Commission (SEC), would expand to all investor claims a two-year-old FINRA pilot program that gives investors filing an arbitration claim against certain firms the option of choosing an all-public panel.

“Giving each individual investor the option of an all-public panel will enhance confidence in and increase the perception of fairness in the FINRA arbitration process,” said Richard Ketchum, FINRA Chairman and Chief Executive Officer. “All investors will have greater freedom in choosing arbitration panels, and any investor will have the power to have his or her case heard by a panel with no industry participants.”

Ketchum displays a tremendous grasp of the obvious in hinting at the lack of confidence and perceived fairness in the prior process.

If approved by the SEC, the rule would give investors the option of choosing an arbitration panel that has two public arbitrators and one non-public arbitrator, as is now the case, or choosing to have their case heard by an all-public panel. The current pilot program involves 14 firms that agreed voluntarily to a set number of investor cases that did not involve individual brokers. The proposed rule would apply to all investor disputes against any firm and any individual broker. It would not apply to arbitration disputes involving only industry parties.

Since the Public Arbitrator Pilot Program began in October 2008, slightly more than 60 percent of investors eligible to participate have opted in, resulting in almost 560 cases to date. Investors opting into the pilot, given the power to eliminate all non-public arbitrators, still chose to have one non-public arbitrator on their panel about 50 percent of the time. The pilot program was originally set to conclude after two years. However, the participating firms agreed recently to extend the pilot program for an additional year while the rule making process goes forward.

No doubt both Wall Street and FINRA realize they need a makeover in terms of public perception. This offer is a win for investors BUT there are many rounds left to go in the ongoing heavyweight fight for real truth, total transparency, and unbridled integrity as we navigate our economic landscape.

To that end, how is the FINRA board handling the proxy proposals submitted by Amerivet Securities and overwhelmingly supported by FINRA’s membership? Will America receive a healthy dose of truth, transparency, and integrity in that process? Will FINRA’s board listen to the American public and open their books and records on those proposals or was this arbitration “win” merely an olive branch while a lot of the real juice embedded in those proxy proposals will remain in hiding? For those interested in further investigating these proposals and seeing what America really wants to learn, please review, FINRA Gets New ‘Sheriffs’; Amerivet Proxy Proposals Approved!! Strongly Recommended.

FINRA, the Financial Industry Regulatory Authority, is the largest non-governmental regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing and enforcing rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and registered firms. Currently, there are roughly 6,200 FINRA arbitrators – 2,700 are non-public and 3,500 public. For more information, please visit

For even more information, please also visit Sense on Cents/FINRA.

Larry Doyle

Please subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no affiliation or business interest with any entity referenced in this commentary. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Kathy

    It is incomprehensible that the industry has any say at all in choosing their own judges in claims against them! After the auction rate securities fraud, I realized how biased the entire arbitration system is against inexperienced small investors without deep financial pockets. There is, effectively, NO legal recourse. Get FINRA out of arbitrations entirely.

    • Nancy

      Hi Kathy,

      We have recently experienced the same in FINRA Arbriation, as we have lost 88% of our Pension Plans, as the mediatdor told us we were the lucky ones. We did not feel we are. FINRA have the wrong policies for rewards and regulators. Our mediator stated some of his clients, were elderly eating cat food because of a ponzi scheme, they were defrauded from. What a disgrace to our Country and the citizens defrauded leaving them distatude because of this
      Mantory Process. The Mediator and Attorney explained this process in not honest. That is what happened to Mail Street America. FINRA has no right to be forcing investors to their Dispute Resolution, this like giving the fox keys to the hen house, it is not possible to a fair process. Lets just open the doors for all thieves, con artist, or dishonest people to have a field day. FINRA laughs all the way to the bank. 40% to Attorney, $2,000 to Mediator, and what is left is yours. Woopie !! This is Scamming of America, the land of the Brave, Freedom …and Injustice to All Investors. Surprise, Finra gets it all, this is a money making process, not Justice to any Investor. Small Investors needs “Bailouts” not WALLSTREET, Go see the new movie “WALLSTREET” they show you just how it is done, more for Hollywood and less money from defrauded investors

      • Vincent

        This has been going on for years. These regulatory agencies have nothing better to do all day long other than to find a way to rob the system for their OWN benefit! Does Mary Shapiro desreve $7mm a year??? Does Richard ketchum deserve $2.5mm? And when he departs, I’m sure he will try and get $7mm too! And this is after aiding and abetting Bernie Madoff! And losing $500mm dollars??? I mean, this is insanity. Jamie Dimon and the other bankers are simple traffic cops. They borrow at zero, and lend out at 3, 4, 500 BPS! I mean how hard is that to mess up? And when they almost blow the world up, they still get paid!!! And its still going on today! gary Gensler and the CFTC and his buddies at the NFA ( Finra wannebes) are establishing rules to make them billionaires. And no one is paying attention! He is a proxy for his old firm Goldman Sachs and his old boys network establishing the next fiefdom. And NO ONE is stopping this guy as he crashes every single important Government process there is! No, no Kathy. These guys like Ketchum, Gensler and Shapiro are laughing all the way to the bank (or maybe gold vault) at us. I mean Tim Geithner cheats on his taxes and his NAME is on OUR curency???? We need to change these people. Here are my top ten:

        1. Tim Geithner
        2. Mary Shapiro
        3. Richard Ketchum
        4. Chuck Prince and Robert Rubin ( at the same time)
        5. Hank Paulson
        6. Jamie Dimon
        7. Lloyd Blankfein
        8. 80% of Congress
        9. 90% of SEC
        10. 100% of CFTC and NFA

    • Nancy

      My husband and I had the misfortune to go thru a Finra Medication, which was set up just as FORBES magazine, had informed us a year before. It took us 7 years to get to court,then we only received 10% to 12% of your losses, while Finra charged $$$thousand of Dollars, for the right to have a resolution of your defrauded Pension Plans,we lost approximately $175,000, but received only about $15,000 or less than 10% of our losses,having to pay $2,000 to the Mediator, 40% to the Attorney, leaving the Attorney to be paid more than your Mediation. We asked for Attorney Fees, Interest, and the principal we lost, as you can see, we got next to nothing in this Corrupt Process, that doest not work for anyone. I following is comments for Judges, overseeing Commadities, which our Broker sed unauthorized trading to invest my husband’s Pension Plan in to Commadities,Futures, see what this Judge has to say:

      Commodity Futures Trading Commission judge says colleague biased against complainants

      As George H. Painter was preparing to retire recently as one of two administrative law judges presiding over investor complaints at the Commodity Futures Trading Commission, he issued an extraordinary request:

      Please don’t assign my pending cases to the other judge. In a notice recently released by the CFTC, Painter said Judge Bruce Levine, his longtime colleague, had a secret agreement with a former Republican chairwoman of the agency to stand in the way of investors filing complaints with the agency.

      “On Judge Levine’s first week on the job, nearly twenty years ago, he came into my office and stated that he had promised Wendy Gramm, then Chairwoman of the Commission, that we would never rule in a complainant’s favor,” Painter wrote. “A review of his rulings will confirm that he fulfilled his vow,” Painter wrote.

      Painter continued: “Judge Levine, in the cynical guise of enforcing the rules, forces pro se complainants to run a hostile procedural gauntlet until they lose hope, and either withdraw their complaint or settle for a pittance, regardless of the merits of the case.”

      The CFTC oversees trading of the nation’s most important commodities, including oil, gold and cotton. The agency’s administrative law judges handle cases in which investors allege that trading professionals or financial firms violated the rules.

      Asked to address Painter’s notice, a CFTC spokesman declined to comment because, he said, the issue was a personnel matter.

      An attorney adviser to Levine, Thaddeus Glotfelty, said that the official position of the CFTC press office was to decline comment and that “Judge Levine has determined to go along with that.” In his notice about his impending retirement, Painter said he could not “in good conscience” simply leave his seven reparation cases to Levine, and he recommended that the CFTC try to enlist another administrative judge from elsewhere in the federal government. The notice was written in mid-September, but released by the CFTC weeks later.

      Levine was the subject of a story 10 years ago in the Wall Street Journal, which said that except in a handful of cases in which defunct firms failed to defend themselves, Levine had never ruled in favor of an investor.

      Gramm could not be reached for comment. Her husband, former senator Phil Gramm (R-Tex.), said he would pass along a message but added, “I doubt she’s going to want to get involved in this.”

      More corruptions, no one could ever win with these Bias, so how fair are the courts or Judges.

  • disenchanted

    Having been an industry arbitartor for many years, I have seen the definite need for at least one of us on the panel. The public arbitrators do not understand the intricate rules and so many issues go over their heads. My expertise works in both directions, from being able to peg a bad apple to a frivilous case. I have called for an executive session so many times to explain to the other arbitrators what is actually going on. Believe me, both sides need us. I have also been called by a Judge to explain the industry to him before he heard a case that went to court instead of arbitration. He was honest and said he had no clue about this intricate industry and could not rule if he had no understanding. I believe aribration should not be mandatory, but is the most logical choice. Pick your own fate!

  • Nancy

    This is a very serious situation, that every cloud does not have a silver lining. Our Pension Plan were taken because of Finra Rules. Rules are Rules and Injustice is Injustice, It is not OK in my book to have innocent defrauded investors especially the elderly expected to follow FINRA bias, leaving their quality of life to be strongly effected by the injustice and long procss of Mediation not fair to any. Age makes this process so difficult they just give up. People in American talk about the Hollacost, just look at what FINRA mediation does to Pension Plans, leaving the elderly or retirees without any quality of life they planned for.
    Too many people are hurt in the WallStreet Meltdown, as Wallstreet are still getting bonuses and have jobs, survial of the fittest. Innocent elderly or retired people are victims to many times to this system that is broken to everyone even our Country.

    Hollywood,is going to make big bucks in their second addition of “Wallstreet”. Again showing this issue as a big problem. FINRA gets fees from the Broker Firm, turning these fees over to the defrauded investor, could help restore main street. or call it victim assistance…

    America at one time stood for the Home of the Brave, with freedom and…..Justice to ALL, not just some. WALLSTREET
    Forbes has written many, many articles on FINRA Mediation /Arbritration, informing their readers the end result,for defrauded Pension Plans awards will be about 12% recovery, because of FINRA’s forced control over the Security Industry. Can our country really afford to continue in this way, because it is a fraud on a fraud. FINRA biases are the biggest part of the problem, they should be responsible for the solution.
    Giving the excessive amount of Investor private information is abserd.

    New philosophy “Justice to All” not Just Wallstreet

    Bring America back to it’s feet, restore Mainstreet, with Fair Security Industry regulations,take FINRA out of the middle. Make American strong again, justice to all. Small investors are being defrauded again by the system designed to protect them. There is no Justice in Injustice. Stop Fraud in America.

    American should not speak of the Hollocost, FINRA is no better, they just do it in a different way.

    My issues are different than yours in the process but the investor is still unprotected by lack of training, supervision,while the Security Laws violated are not upheld justly, the system is broken to all.

  • John W

    The contact at the SEC investigating Advent Claymore and their Auction Rate Security Fraud & Illiquidity:

    I am contacting you regarding the complaint you submitted to the Securities and Exchange Commission on April 18, 2010. I would like to discuss this further with you in order to obtain more information. Is there a time this week that you are available to talk? I am unavailable tomorrow, but I have availability on Wednesday, Thursday, or Friday.


    Jeff Shank
    Shank, Jeffrey

    Division of Enforcement

    United States Securities and Exchange Commission

    This is the jackazz at Advent Claymore to write:

    William T. Korver
    Vice President
    Claymore Securities, Inc.

    630.505.3720 Office
    630.750.3344 Mobile

    • John W

      Shank, Jeffrey SHANKJ@SEC.GOV

      contact email for Advent Claymore investigation on their ASRPS with SEC

      The more he hears from the better.

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