FINRA Blackballs Mutual Fund and Hedge Fund Execs from Arbitration Roster
The SEC has approved new FINRA rules that prevent persons associated with mutual funds and hedge funds from serving as public arbitrators. FINRA’s new rules respond to concerns raised by “investor representatives” about such persons’ neutrality. Additionally, such excluded persons must disassociate for at least 2 years before qualifying to serve as a public arbitrator. Other excluded persons include investment advisers, attorneys who work in the securities industry, and directors and officers of firms in the securities industry.
OUR TAKE: We couldn’t disagree more with this approach. Why would FINRA want to exclude professionals that actually know something about the securities industry? Is this plaintiff’s argument about perceived neutrality actually supported by any empirical evidence?