What Financial Advisors Should Know About Recent FINRA Updates

Financial advisors and brokerage firms have a lot on their plates. However, it’s important to stay informed about the latest news and proposed rule changes the Financial Industry Regulatory Authority (FINRA) announces, as amended rules may impact you or your firm. From tracking the latest virtual arbitration hearing statistics to understanding the potential impact of proposed rule changes, it’s a good idea to keep current in this ever-shifting industry. Below are just a few of the recent trends, filings, and proposed rule changes that FINRA has reported.

Clarifying Best Practices for FINRA Arbitrators

Most FINRA arbitrators also serve as arbitrators in other contexts. Recently, FINRA clarified its language and rules about an arbitrator’s ability to use their role as a FINRA arbitrator to promote their arbitration services elsewhere. In a recent press release, FINRA stated, “Upon approval, arbitrators are free to advertise or promote their role as a FINRA arbitrator—this can include resumes, business cards, websites or social media platforms.” However, FINRA proceeded to clarify that arbitrators must promote such services in accordance with the Code of Ethics for Arbitrators in Commercial Disputes. Essentially, arbitrators must present their services honestly and accurately, and they cannot present themselves as an employee of FINRA, as they are actually independent contractors. Additionally, FINRA arbitrators may not use the FINRA logo in any promotional materials and should refrain from publishing statements or opinions that could be attributed to FINRA.

The Latest FINRA Virtual Arbitration Hearing Statistics

In the wake of the COVID-19 pandemic, FINRA postponed in-person hearings through May 31, 2022. During this period, 850 arbitration cases have held one or more hearings over Zoom (including 356 customer causes and 494 industry cases). FINRA’s Dispute Resolution Services received 1,202 motions for Zoom hearings through May 31, 2022 (582 contested motions and 620 joint motions). Of the 414 customer contested motions, 252 were granted, 155 were denied, and seven remain open. FINRA granted 123 of the 168 intra-industry contested motions, denied 43, and two remain open.

Updates to the Customer Dispute Information Expungement Process

FINRA released a Discussion Paper on Expungement of Customer Dispute Information in April 2022, presenting background information and data pertaining to the customer dispute information expungement process. The document explores the potential impact of establishing a Special Roster of independent arbitrators and how this action could address current concerns about the expungement process. Additionally, the paper includes several amendments or alternatives to the current expungement process, all from the perspective of protecting the public more effectively and directly.

FINRA’s Pilot Program for Virtual Prehearing Conferences

The Dispute Resolution Services department launched a pilot program offering participants a virtual prehearing conference option. These prehearing conferences will be held over Zoom, with the video function enabled. FINRA previously held 847 prehearing conferences via Zoom between February 2022 and May 2022. Of these conferences, 312 enabled the video function, while 535 were held with audio-only. Moving forward, this pilot program aims to streamline this process and make it a viable option for holding prehearing conferences in a more effective and accessible manner.

Arbitration Case Filings Decrease

According to the latest FINRA arbitration case filings statistics, new case filings fell by 16 percent between January 2022 and May 2022, compared to the same five-month window in 2021. Additionally, customer-initiated claims decreased by 22 percent in 2022. So far, the most common types of controversies addressed in arbitration filings in 2022 include breach of fiduciary duty (485 cases), negligence (443 cases), failure to supervise (387 cases), breach of contract (363 cases), misrepresentation (351 cases), suitability (330 cases), omission of facts (283 cases), fraud (258 cases), violation of Blue Sky laws (124 cases), manipulation (91 cases), unauthorized trading (63 cases), elder abuse (62 cases), errors-charges (40 cases), breach of regulation BI (37 cases), and execution error (34 cases). The top security types in customer arbitrations in 2022 include common stock (135 cases), real estate investment trusts (98 cases), mutual funds (54 cases), and private equities (54 cases). As we move into the later months of 2022, we’ll gain a clearer picture of whether this downward filing trend will continue.

Trusted Legal Guidance When You Need it Most

The financial industry is a fast-paced landscape of ever-evolving rules and regulations. If you find yourself facing an unfair disclosure and you need help getting this false information expunged from the CRD or BrokerCheck, reach out to an experienced and understanding securities law attorney to discuss your options. It’s natural to feel frustrated and overwhelmed by the arbitration process, but you do not have to go through this stressful period alone. Working with a trusted attorney is the best way to ensure you move forward with greater clarity and confidence toward your desired outcome.


Call Judex Law LLC today at (303) 523-4022 to discuss your situation with a dedicated and experienced securities law attorney.

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