Finra is considering raising the fees related to pursuing an arbitration claim against a brokerage firm in order to increase the pay for people who hear the cases.
Arbitrators' honoraria is one of eight items on the agenda for Thursday's meeting of the board of the Financial Industry Regulatory Authority Inc. It also will consider registration fees for equity crowdfunding portals, which must register with the broker-dealer regulator.
The results of the board votes will be posted on the Finra website after the meeting.
Finra has come under pressure this year to improve its arbitration system.
This fall, the Public Investors Arbitration Bar Association released a study asserting that Finra arbitrators too often allow brokers to clear their records of investor claims.
A panel of three arbitrators typically adjudicates claims filed by investors and by brokers against financial firms. They are paid an honorarium of $200 for each hearing session, and the panel chairman receives an extra $75 per day.
Arbitration cases can last several days.
Arbitrator pay hasn't been adjusted since 1999.
The move is long overdue, according to Robert Banks Jr., owner of Banks Law Office PC.
Finra pay is far less than rates that lawyers and accountants charge, he said.
“You're losing money every day you show up,” said Mr. Banks, who is a Finra arbitrator.
“Everybody complains about it,” he said. “I've talked to lawyers who have said they won't apply [to be an arbitrator] based on the fees that are paid.”
Finra needs to provide better incentives for people to join the pool of arbitrators, which numbers 6,444, according to S. Lawrence Polk, a partner at Sutherland Asbill & Brennan.
The issue has gained more urgency since the Securities and Exchange Commission approved a Finra rule this year that makes an all-public arbitration panel the default option for hearing cases, he said.
Claimants also can select a panel consisting of two public arbitrators and one from the financial industry.
The Finra pool includes 3,569 public arbitrators. Through October, 3,156 arbitration cases had been filed this year.
“The numbers don't add up to cover all those cases,” Mr. Polk said.
“They need to increase the number of public arbitrators and increase the quality of the arbitrators,” he said. “They need to do something to attract more attorneys to serve as [panel] chairpersons.”
Raising arbitrator pay may hurt individual investors, said Peter Chepucavage, general counsel at Plexus Consulting Group.
“It's going to make arbitration more expensive, which for the retail investor is problematic,” he said.
Finra uses a sliding scale to assess fees for filing arbitration claims.
For cases involving amounts of $100,000 to $500,000, the fee is $1,425. For cases in the $500,000 to $1 million range, it is $1,575.
The fees for cases filed by Finra member firms in those ranges are $2,450 and $3,200, respectively.
With Finra subsidizing much of the cost of arbitration, it should be able to increase arbitrator pay seamlessly, Mr. Banks said.
“It shouldn't mean that it's going to cost more to file a claim,” he said.