Arbitrator Ethics

Arbitrators are the triers of fact in FINRA arbitrations and they have great authority and wide latitude to decide matters as they see fit. Arbitrators must be, and appear to be, ethical, unbiased and neutral. In this section, you will find the resources and guidelines to achieve these goals.

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Code of Ethics for Arbitrators

Arbitrators must read and comply with the ethical standards in the Code of Ethics for Arbitrators in Commercial Disputes. The annotated version states how courts have interpreted the rules of the Code of Ethics. Arbitrators are encouraged to refer to the Code of Ethics regularly.

The Code of Ethics is not a substitute for, nor does it supersede, applicable law or the Codes of Arbitration Procedure for Customer Disputes and Industry Disputes.

Disclosure Requirements

Arbitrator disclosure is the cornerstone of FINRA arbitration, and the arbitrator's duty to disclose is continuous and imperative. Disclosure includes any relationship, experience and background information that may affect—or even appear to affect—the arbitrator's ability to be impartial and the parties' belief that the arbitrator will be able to render a fair decision. This includes any disclosure about clients, accounts or conflicts, including the nature of the conflict. For example, any brokerage firm where the arbitrator/spouse/family member has or had an account or employment should be disclosed. Arbitrators are under a continuing obligation to update this information.

When making disclosures, arbitrators should consider all aspects of their professional and personal lives and disclose all ties between the arbitrator, the parties, and the matter in dispute, no matter how remote they may seem. Full disclosure also requires arbitrators to include events and circumstances that occurred while using a former name.

If you need to think about whether a disclosure is appropriate, then it is: Make the disclosure. Failure to disclose may result in vacated awards which undermine the efficiency and finality of our process. Failure to disclose may also result in removal from the roster.

Neutrality starts with complete and accurate disclosures in FINRA's arbitrator application. FINRA uses an arbitrator’s application as the foundation for the Arbitrator Disclosure Report (Disclosure Report)—a summary of an arbitrator's background—which is provided to parties to help them make informed decisions during the arbitrator selection process. Please review the Sample Arbitrator Disclosure Report on our website.

Required Disclosures

Case-Specific Disclosures

Rule 12405 of the Code requires arbitrators to make a reasonable effort to learn of, and disclose to FINRA, any circumstances that might preclude them from rendering an objective and impartial determination in the proceeding, including:

  • Any direct or indirect financial or personal interest in the outcome of the case;
  • Any existing or past financial, business, professional, family, social, or other relationships or circumstances with any party, representative, or potential witness, that is likely to affect impartiality or might reasonably create an appearance of partiality or bias;
  • Any such relationship or circumstances involving members of the arbitrator's family or the arbitrator's current employers, partners or business associates; and
  • Any existing or past service as a mediator for any of the parties in the case for which the arbitrator has been selected.

Individuals employed in the securities industry should also disclose whether their firm makes a market in the securities involved in the assigned case, and whether they have placed clients in the same or similar investment. All arbitrators should consider whether they hold (or have held) a position in the security/investment involved, and disclose this information to FINRA.

Arbitrators must also make any disclosures regarding the nature of the subject matter submitted to arbitration, including any opinion, belief or position that they may have regarding any substantive issue in dispute.

Non Case-Specific Disclosures

In addition to potential case-specific conflicts, arbitrators must also disclose any circumstance that might affect their ability to serve under the Arbitrator Disqualification Criteria, or affect their classification as either a public or non-public arbitrator, including:

  • new relationships as they arise,
  • any circumstance or event that might affect their ability to serve impartially or might create an appearance of bias. This includes, but is not limited to:
    • lawsuits (even non-investment related lawsuits),
    • any publications (even if they appear only online),
    • professional memberships, and
    • service on boards of directors.

The obligation to disclose interests, relationships or circumstances that might preclude an arbitrator from rendering an objective and impartial determination is a continuing duty that requires an arbitrator who accepts an appointment to disclose—at any stage of the proceeding—any such interests, relationships or circumstances that arise, or are recalled or discovered. In addition to relationships, it is advisable to disclose any life experience that may raise any doubt about your ability to be impartial.

These disclosure requirements also apply to arbitrators who hear cases between industry parties only. (Go to Rule 13408 of the Code of Arbitration Procedure for Industry Disputes.)

Last Affirmation Dates

FINRA displays the date that arbitrators last affirmed the accuracy of their disclosure reports at the top of the disclosure report documents. Arbitrators are advised to regularly review and affirm the accuracy of their disclosures on the DR Portal, as parties may consider the last affirmation date as a factor when selecting arbitrators for their cases.

Arbitrators can confirm the accuracy of their disclosures in two ways:

  • Submitting an update through the DR Portal; or
  • Submitting an Oath of Arbitrator when assigned to a case.

The last affirmation date is not updated when arbitrators submit updates to their disclosure report by any method other than submitting an update through the DR Portal or submitting an Oath. Therefore, arbitrators are encouraged to affirm their disclosures through the DR Portal regularly.

Disqualification Criteria

Criteria for Temporary Disqualification

When the Temporary Disqualification Criteria are met, FINRA will temporarily decline new applicants and will temporarily remove enrolled arbitrators from service.

  • Pending Actions
    Arbitrator is the subject of, or is a party to, a FINRA arbitration; or a pending investment-related civil action or arbitration claim initiated by a customer; or civil action or administrative complaint initiated by a regulatory body; or a civil action or regulatory complaint alleging discrimination or harassment. This provision excludes cases where the arbitrator's conduct in his or her role as an arbitrator is at issue.
     
  • Subject of Claims or Complaints
    Arbitrator is the subject of, or is a party to, three (3) or more claims or complaints (reportable on Form U-4) within the last ten (10) years regardless of outcome.
     
  • Filed a Statement of Claim or Complaint
    Arbitrator is a party (excluding representatives and unnamed parties to class actions) that has filed two or more investment-related civil actions or arbitration claims within the last ten (10) years.
     
  • Final Decisions, Awards
    Arbitrator is the subject of, or is a party to, a final, adverse investment-related court decision or arbitration award of $25,000 or more within the past seven (7) years resulting from a customer-initiated complaint or claim.
     
  • Director’s Judgment
    The Director of Dispute Resolution Services (Director) may temporarily remove an arbitrator, if, in his or her sole judgment, it is determined that the arbitrator is not otherwise properly included in the list of eligible neutrals.

Criteria for Permanent Disqualification

When the Permanent Disqualification Criteria are met, FINRA will permanently decline new applicants, and will permanently remove enrolled arbitrators from service.

  • Misstatement/Omission
    Misstatement or failure to disclose material information.
     
  • Disciplinary Actions
    Final, adverse disciplinary action, including one levied as a result of a settlement, resulting in a fine, suspension, expulsion, or similar penalty by any domestic or foreign regulatory or governing professional body or regulatory authority on a finding of, including but not limited to, false statement or omissions, material violation of investment-related regulation, or the violation of a non-technical rule1 of such organizations or statute.

    At the discretion of the Director, a final, adverse disciplinary action, including one levied as a result of a settlement, resulting in an admonishment, reprimand, or similar penalty by any domestic or foreign regulatory or governing professional body or regulatory authority on a finding of, including but not limited to, false statement or omissions, material violation of investment-related regulation, or the violation of a non-technical1 rule of such organizations or statute.
     
  • Fraud
    Final adverse court decisions where there has been a finding of fraud.
     
  • Decisions, Awards, Involving Discrimination/Harassment
    Arbitrator is the subject of, or is a party to, a final, adverse regulatory decision, arbitration award, or judicial decision involving any discrimination claims, including harassment, in which the arbitrator was found to have engaged in harassment or discrimination.
     
  • Director’s Judgment
    The Director, upon approval from the National Arbitration & Mediation Committee (NAMC), may remove an arbitrator if, in his or her judgment, the arbitrator is not otherwise properly included in the list of eligible neutrals. The Director’s recommendation is forwarded to NAMC Chairperson and the Chairperson of the NAMC’s Neutral Roster Subcommittee who must unanimously approve an arbitrator’s removal from the roster. Upon their approval, the arbitrator is removed from the roster and is no longer available to serve on cases.

    Examples of inappropriate behavior that may result in an arbitrator's removal from the roster include, but are not limited to:
    • hate speech/violence;2
    • failing to be impartial, both in appearance and in fact;
    • being rude to parties, counsel or staff;
    • demonstrating perceived inability to follow or grasp the issues in dispute;
    • being inflexible, especially with regard to mutual requests from parties;
    • causing repeated and routine scheduling problems;
    • being unprepared for conferences and hearings;
    • being unwilling to abide by the Code; and
    • violating the Code of Ethics for Arbitrators in Commercial Dispute

10 Best Practices for Arbitrators

  1. Maintain control over all arbitration conferences and hearings from the outset. Set "ground rules" of behavior at the beginning and be consistent about enforcing them!
  2. Be familiar with, understand and be able to interpret the FINRA Code of Arbitration Procedure.
  3. Be fully prepared for all conferences and hearings by reading the pertinent documents in advance, including the Code of Ethics for Arbitrators in Commercial Arbitration available on FINRA's website.
  4. Be punctual in convening all conferences and hearings. If delayed, notify the administrative staff as soon as possible.
  5. Discourage abuses of the process, such as: unreasonable requests for discovery, last-minute requests for recusal, redundant evidence or testimony, or procrastination in scheduling.
  6. Remember your authority if and when parties fail to comply with your orders or directives.
  7. Do not use or tolerate hostile, demeaning or humiliating words in written or oral communications among lawyers, parties, witnesses or the administrative staff.
  8. Make all reasonable efforts to decide promptly all matters presented for decision.
  9. The administrative staff is an integral part of the alternative dispute resolution process. Treat them with courtesy and respect at all times.
  10. Understand and comply with the policies of Dispute Resolution regarding reimbursement for expenses and arbitrator honorarium.

Your service as a FINRA arbitrator is highly valued and appreciated. Thank you for your cooperation.

1 FINRA “technical violations” are defined in FINRA Rule 9217.

2 FINRA Dispute Resolution Services prohibits any conduct or written or verbal comments by arbitrators that disparages, denigrates or demonstrates hostility or aversion toward any person based upon any classification protected by law. Examples of conduct, which are grounds for removal from the roster, include, but are not limited to: