The Financial Industry Regulatory Authority (FINRA) recently enacted sweeping changes and updates to its arbitration rules and procedures. FINRA’s Dispute Resolution Services (DRS) “helps investors and firms resolve securities-related disputes through arbitration and mediation. We provide a fair, efficient and effective forum for resolving disputes involving brokerage firms and their brokers. When a customer files a complaint about an individual broker or financial firm, arbitration is often used to resolve the dispute. In recent years, FINRA adopted a series of updated and revised rules that pertain to the arbitration process. Now that these changes have been in effect for some time, FINRA recently issued Regulatory Notice 26-06 that sought feedback on its efforts to modernize the arbitration rules, guidance, and processes. Stakeholders and advocacy groups were invited to provide comments on several topics, from arbitrator training and qualifications to pre-hearing motions to dismiss pending disputes.
Although the comment period ended on May 1, 2026, it’s worth taking a look at the types of feedback FINRA was requesting and what we can expect the regulatory body to do with the comments and insights that were collected. As a financial advisor, understanding the shifts in FINRA’s codes of arbitration procedure and how they may affect you in the event of a potential dispute helps to minimize confusion and inspire greater confidence, should an issue arise. Let’s take a closer look at some of the most recent FINRA modernization efforts and how enlisting the guidance of a highly experienced and friendly securities law attorney is the best way to prepare for an upcoming customer dispute while protecting your best interests at every turn.
Why FINRA is Asking For Feedback on Arbitration Rules and Procedures
When FINRA issued the notice for feedback on its arbitration rule modernization efforts, it addressed some of the reasons why the regulatory body was soliciting comments from stakeholders and advocacy groups. The notice stated, “Some of the concerns raised in response to the rule modernization Notices involve controversial issues that have been discussed in connection with FINRA’s arbitration forum for years, including by the previously formed task forces, and would benefit from additional input regarding modern practices and how FINRA’s arbitration forum works today for participants.” In other words, FINRA acknowledges that many concerns about the arbitration process predate the recently enacted rule changes, and it’s important to take some time to gather feedback from a broad range of stakeholders and participants.
The FINRA Arbitration Rules Open to Stakeholder Feedback
The feedback form provided by FINRA included more than 60 questions, addressing a wide range of topics related to its modernization efforts. A few of the focus areas are listed and discussed below.
FINRA’s Eligibility Rule
Under FINRA’s current eligibility rule, claims that are made more than six years after the event at the center of the dispute are invalid. Concerns arose from those who felt that the current language used to explain the eligibility rule was too broad and vague, so FINRA asked commenters to share their thoughts as to whether the eligibility rule should be eliminated and rely on statutes of limitations to assess claim eligibility, clarified to explicitly bar claims stemming from events that took place more than six years ago, or amended to allow some claims that involve ongoing damages or concealed harm to proceed—even if six years have passed since the inciting event.
Prehearing Motions to Dismiss
FINRA’s current arbitration rules discourage parties from filing prehearing motions to dismiss, allowing only narrow grounds like prior release, naming the wrong party, and prior final adjudication of the same dispute. Concerned parties have asked FINRA to expand the acceptable grounds for dismissal and require written explanations when such a motion is granted. FINRA’s request for feedback asked commenters for their thoughts about whether altering the timing and grounds for prehearing motions to dismiss should be pursued and how to consider potential efficiency benefits against ensuring consumer protection.
Arbitrator Training and Qualifications
One of FINRA’s most detailed amendments to the codes of arbitration concerned the qualifications and training of arbitrators. FINRA has heard concerns about the lack of diverse backgrounds among the qualified arbitrators and that the ability to strike any non-public arbitrator (i.e., industry-affiliated arbitrators) can lead to panels composed of exclusively public arbitrators. FINRA asked for input about whether to broaden the term “public arbitrator” or eliminate the ability to strike non-public arbitrators. Another area where FINRA solicited feedback concerned its arbitrator training programs, which some have said are not thorough enough to prepare arbitrators for complex cases.
Punitive Damages
Parties have expressed their concerns about the current guidelines about punitive damages. Under the current rules, arbitrators are allowed to award punitive damages, but some feel the need to add clearer restrictions, impose punitive damages caps, or establish an appeals process related to punitive damages.
What Happens Next
Now that the feedback window has closed, FINRA will review the comments and identify areas to focus on and propose additional changes to better safeguard investors and improve the overall efficiency of the arbitration process. According to FINRA, the regulatory body “is committed to continuous improvement and has actively reviewed its regulatory requirements and processes to administer a fair and efficient arbitration forum.” We can expect FINRA to issue a statement once it has prepared actionable items and drafted revised rules and procedures.
When Should I Hire a Securities Law Attorney?
FINRA arbitration rules can be confusing to parse, especially when they continuously change and update. If you are an individual financial advisor or part of a member firm that has been named in an upcoming customer or intra-industry dispute, it’s highly recommended that you partner with an experienced and skilled FINRA arbitration attorney who can support you through every step of the process.
Get Started With a Trusted and Experienced Securities Law Attorney Today
As a financial advisor or a securities firm, the prospect of participating in FINRA’s arbitration process can seem daunting and stressful. That’s why it’s highly recommended that you enlist the guidance of an experienced and knowledgeable FINRA arbitration attorney who can support you through the process and represent your best interests at every opportunity. At Judex Law LLC, we believe in empowering our clients to understand their legal options and move forward with greater certainty and confidence. Please give our office a call today at (303) 523-4022 to get started.