Call Now For a Free Consultation:
(614) 502-6165

Major Blow to Transparency Efforts of SEC Oversight of FINRA Arbitration

The U.S. Court of Appeals for the District of Columbia Circuit recently affirmed a trial court's order denying an investors' rights group's Freedom of Information Act request for certain documents relating to the Securities & Exchange Commission's (SEC) oversight of Wall Street's mandatory arbitration program.

At issue was a request by the Public Investors Arbitration Bar Association (PIABA), a nationwide organization of attorneys who represents investors in securities arbitration disputes, for documents relating to the SEC's oversight of the arbitration program administered by the Financial Industry Regulatory Authority (FINRA). FINRA is a self-regulatory organization funded by Wall Street and charged with regulating brokerage firms. The SEC oversees and examines FINRA.

In 2011, PIABA submitted a FOIA request to the SEC for documents relating to the SEC's audits, inspections, and reviews of FINRA's arbitration program, in particular documents relating to how arbitrators are selected by FINRA to hear customer disputes. The SEC denied the request, contending that the documents constituted "examination reports" that were exempt from disclosure under FOIA.

PIABA filed suit in U.S. District Court against the SEC seeking to compel disclosure of the requested records. The district court ultimately ruled in favor of the SEC.

By affirming the district court's ruling, the D.C. Circuit Court struck a major blow to efforts to bring some transparency to the SEC's oversight of FINRA's arbitration program.

Investors are forced into the arbitration process when signing agreements to open their brokerage accounts. Under that process, FINRA randomly selects potential arbitrators who are then reviewed and scored by the parties.

At a minimum, investors should be able to know how FINRA randomly selects arbitrators to hear their cases.

Unfortunately for investors, pending further court review, that process will remain shrouded in secrecy.

The information contained in The Firm’s posts on its blog, fraud alerts, investigations or elsewhere on the site is based upon information obtained from other sources including, but not limited to, news outlets and federal, state, and regulatory agency filings. All suspects and subjects of postings herein are presumed innocent until proven guilty in a court of law or administrative action and any and all crimes are alleged until a court or regulatory agency finds otherwise .

Share This Story
If you found the information provided by this article useful, consider sharing to your social media channels to help others in their search for reliable resources.
Consult with Our Legal Team
There is never a cost associated with a consultation
Columbus Office

614-224-6000
305 W. Nationwide Blvd
Columbus, OH 43215
Meyer Wilson
New Orleans Office

900 Camp Street 
Suite 337
New Orleans, LA 70130
Los Angeles Office

310-905-8688
2029 Century Park East,
Suite 400N
Los Angeles, CA 90067
Cleveland Office

216-600-1355
4781 Richmond Rd.
Suite 400
Warrensville Heights, OH 44128
Bloomfield Hills Office

248-817-8214
41000 Woodward Ave.,
Suite 350
Bloomfield Hills, MI 48304
Quick Links
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient's state. Read More
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Read More
chevron-down linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram