Finra set to resume in-person arbitration hearings

Finra will resume in-person arbitration and mediation hearings in almost all of its jurisdictions beginning in early July, the regulator announced Monday.

The Financial Industry Regulatory Authority Inc. had postponed in-person hearings since the outbreak of the Covid-19 pandemic last year and continued to extend the delay over social distancing concerns. It will start holding them again in 62 of its 69 hearing locations on July 5, the broker-dealer self-regulator said in a statement on its website.

In-person hearings will continue to be suspended in Buffalo; Detroit; Philadelphia; Augusta, Georgia.; Boca Raton, Florida.; Providence, Rhode Island; and Wilmington, Delaware through July 30. Finra determined that public health conditions didn’t meet the criteria for resuming hearings in those locations. The regulator said its staff will contact arbitration parties with hearings in those locations to reschedule the proceeding or discuss virtual hearing options.

Finra’s move to reopen the arbitration process comes a couple weeks after the Public Investors Advocate Bar Association sent a letter to the broker-dealer self-regulator asserting that the suspension of in-person hearings protects brokerages and harms investors.  

“PIABA is pleased to see that FINRA’s dispute resolution program is getting back to the business of resolving disputes, at least in 62 of the 69 hearing locations,” PIABA President David Meyer said in a statement. “Now that cases will be restarting in most hearing locations as of July 5, we need to know from FINRA what its plan is in regards to restarting in-person hearings in the remaining hearing locations. For example, what health criteria are they are relying on to extend the postponements in those remaining locations?”

Finra operates the arbitration system in which disputes between customers and firms and registered representatives are adjudicated. During the pandemic, Finra offered arbitration parties the option of conducting remote hearings via a conference call or Zoom.

“Virtual hearings were the best we could do once the pandemic hit, but at least in some cases, parties want the option of an in-person hearing,” George Friedman, editor-in-chief of the Securities Arbitration Alert, wrote in an email. “It will be interesting to see how many participants will want to continue participating virtually.”

In the jurisdictions that are reopening, Finra said it will consult with public health officials in hearing locations at least six weeks prior to the beginning of each arbitration hearing to determine whether conditions will permit an in-person session. Finra officials will continue to review the conditions each week until the hearing.

“If public health conditions at a hearing location deteriorate, Finra [Dispute Resolution Services] may postpone in-person hearings that have been scheduled for that location,” Finra said on its website.

Finra said it could postpone an in-person hearing if a participant can’t comply with local quarantine and other public health requirements. A hearing also could be postponed if one or more of the arbitrators hearing a case is unwilling to participate in-person.

Even if in-person proceedings are allowed, Finra said arbitration parties can still continue to request a remote hearing.

Both parties in an arbitration proceeding must agree for it to be conducted remotely. As of the end of March, 263 arbitration cases have conducted one or more hearings via Zoom, according to Finra arbitration statistics.

Remote arbitration has received mixed reviews. But Friedman says it will remain after the pandemic recedes.

“While a switch may have been abruptly turned off in March 2020, I don’t see it being completely flipped back in the new normal post-pandemic world,” said Friedman, a former director of Finra arbitration. 

Related Topics: Financial Industry Regulatory Authority