Why FINRA’s Arbitrator Disclosure Rules Matter

The Financial Industry Regulatory Authority (FINRA) imposes numerous rules on brokerage firms and financial advisors to protect the public’s best interest. In recent months, FINRA has adopted additional measures to crack down on firms with a significant history of misconduct, putting individual financial advisors under increased scrutiny. However, it’s important for those in the financial industry to understand that FINRA also holds its panel of arbitrators to certain standards. Here’s what you need to know about FINRA’s arbitrator disclosure rules and how they may affect your upcoming investigation or arbitration matter.

Understanding FINRA Rules 12405/13408

There are specific rules governing an arbitrator’s responsibility to disclose relevant information before serving in this capacity. FINRA Rule 12405/13408 states, “Each potential arbitrator must make a reasonable effort to learn of, and must disclose to the Director, any circumstances which might preclude the arbitrator from rendering an objective and impartial determination in the proceeding.” For instance, if an arbitrator has an existing relationship with anyone involved in the arbitration matter, the arbitrator has an obligation to disclose this information.

Consequences of an Arbitrator’s Failure to Disclose

FINRA maintains that an arbitrator’s failure to disclose potential conflicts of interest jeopardizes the integrity of this process. If an arbitrator fails to fully disclose any potential sources of bias, the arbitration awards may be vacated and the arbitrator may be removed from the formal roster. In recent years, several motions to vacate arbitration awards have been filed, claiming that arbitrators failed to disclose relevant and easily discoverable issues. If you are facing an upcoming FINRA arbitration and you have concerns about the integrity of the process, speak to an experienced securities law attorney to assess your options.

Protecting Your Professional Reputation

Receiving notification from FINRA of your involvement in an investigation or arbitration can be stressful, especially as you wonder how this matter will impact your career and professional reputation. The most strategic action you can take is to contact a knowledgeable securities law attorney who can assess the details of your situation and help you determine the best path forward. The arbitration process is not always fair, so it’s essential that you and your attorney move through the process with vigilance.


If you need help navigating an upcoming FINRA investigation or arbitration, call Judex Law LLC today at (303) 523-4022 to speak with a skilled and friendly securities law attorney.

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