81 FR 88720 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving Proposed Rule Change To Amend Rule 12400 of the Code of Arbitration Procedure for Customer Disputes and Rule 13400 of the Code of Arbitration Procedure for Industry Disputes Relating To Broadening Chairperson Eligibility in Arbitration

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 236 (December 8, 2016)

Page Range		88720-88724
FR Document		2016-29385
Federal Register, Volume 81 Issue 236 (Thursday, December 8, 2016)
[Federal Register Volume 81, Number 236 (Thursday, December 8, 2016)]
[Notices]
[Pages 88720-88724]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-29385]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79455; File No. SR-FINRA-2016-033]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving Proposed Rule Change To Amend Rule 
12400 of the Code of Arbitration Procedure for Customer Disputes and 
Rule 13400 of the Code of Arbitration Procedure for Industry Disputes 
Relating To Broadening Chairperson Eligibility in Arbitration

December 2, 2016.

I. Introduction

    On August 18, 2016, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend Rules 12400 of the Code 
of Arbitration Procedure for Customer Disputes (``Customer Code'') and 
Rule 13400 of the Code of Arbitration Procedure for Industry Disputes 
(``Industry Code'' and, together with the Customer Code, ``Codes'').\3\ 
The proposed rule change would allow an attorney arbitrator to qualify 
for the chairperson roster if he or she completes chairperson training 
and serves as an arbitrator through award on at least one arbitration. 
The Codes currently require that an attorney must serve as arbitrator 
through award on at least two arbitrations in order to qualify for the 
chairperson roster.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See File No. SR-FINRA-2016-033.
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    The proposed rule change was published for comment in the Federal 
Register on September 6, 2016.\4\ The public comment period closed on 
September 27, 2016. The Commission received five (5) comment letters on 
the proposed amendments.\5\ On October 14, 2016, FINRA extended the 
time period in which the Commission must approve the proposed rule 
change, disapprove the proposed rule change, or institute proceedings 
to determine whether to approve or disapprove the proposed rule change 
to December 5, 2016.\6\ On November 22, 2016, FINRA responded to the 
comment letters received in response to the Notice.\7\ This order 
approves the proposed rule change.
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    \4\ See Exchange Act Release No. 78729 (Aug. 30, 2016); 81 FR 
61288 (Sept. 6, 2016) (``Notice'').
    \5\ See Letters from Steven B. Caruso, Esq., Maddox Hargett 
Caruso, P.C. (Aug. 31, 2016) (``Caruso Letter''); Ryan K. Bakhtiari, 
Aidikoff, Uhl and Bakhtiari (Sept. 9, 2016) (``Bakhtiari Letter''); 
Hugh Berkson, President, Public Investors Arbitration Bar 
Association (``PIABA'') (Sept. 23, 2016) (``PIABA Letter''); Nicole 
Iannarone, Asst. Clinical Professor, and Geoffrey R. Hafer, Student 
Intern, Investor Advocacy Clinic, Georgia State University College 
of Law (``GSU'') (Sept. 26, 2016) (``GSU Letter''); and David T. 
Bellaire, Esq., Executive Vice President and General Counsel, 
Financial Services Institute (``FSI'') (Sept. 27, 2016) (``FSI 
Letter''). The comment letters are available on FINRA's Web site at 
http://www.finra.org, at the principal office of FINRA, at the 
Commission's Web site at https://www.sec.gov/comments/sr-finra-2016-033/finra2016033.shtml, and at the Commission's Public Reference 
Room.
    \6\ See Letter from Margo A. Hassan, Associate Chief Counsel, 
FINRA, to Lourdes Gonzalez, Assistant Chief Counsel--Sales 
Practices, Division of Trading and Markets, Securities and Exchange 
Commission, dated October 14, 2016.
    \7\ See Letter from Margo A. Hassan, Associate Chief Counsel, 
FINRA, to Brent J. Fields, Secretary, Securities and Exchange the 
Commission, dated November 22, 2016 (``FINRA Letter''). The FINRA 
Letter is available on FINRA's Web site at http://www.finra.org, at 
the principal office of FINRA, at the Commission's Web site at 
https://www.sec.gov/comments/sr-finra-2016-033/finra2016033.shtml, 
and at the Commission's Public Reference Room.
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II. Description of the Proposed Rule Change \8\
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    \8\ The subsequent description of the proposed rule change is 
substantially excerpted from FINRA's description in the Notice. See 
Notice, 81 FR at 61288-61289.
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Background
    FINRA arbitrators possess the broad authority to ``interpret and 
determine the applicability of all provisions under the Code[s]. Such 
interpretations are final and binding upon the parties.'' \9\ To 
facilitate the fair administration of proceedings in the FINRA forum, 
arbitrators must possess sufficient qualifications and participate in 
appropriate training \10\--particularly where an arbitrator presides 
over the proceeding as chairperson, with the authority to, among other 
things, direct witness appearances, order the production of documents 
and information, and set deadlines in a given case.\11\
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    \9\ See FINRA Rules 12409 (Jurisdiction of Panel and Authority 
to Interpret the Code) and 13413 (Jurisdiction of Panel and 
Authority to Interpret the Code).
    \10\ See Notice, 81 FR 61289.
    \11\ See FINRA Office of Dispute Resolution Arbitrator's Guide 
(Oct. 2016), at page 31, available at http://www.finra.org/sites/default/files/arbitrators-ref-guide.pdf.
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    FINRA maintains a roster of non-public arbitrators,\12\ public 
arbitrators,\13\ and arbitrators who are eligible to serve as 
chairperson in each of its 71 hearing locations.\14\ FINRA employs its 
computerized Neutral List Selection System to randomly generate lists 
of potential arbitrators for each proceeding from these rosters.\15\ 
The parties then select their arbitrators through a process of striking 
and ranking the names on the list generated by the Neutral List 
Selection System.\16\
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    \12\ For the definition of ``non-public arbitrator,'' see FINRA 
Rules 12100(p) and 13100(p).
    \13\ For the definition of ``public arbitrator,'' see FINRA 
Rules 12100(u) and 13100(u).
    \14\ See FINRA Rules 12400(b) and 13400(b).
    \15\ See FINRA Rules 12400(a) and 13400(a).
    \16\ Id.
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    The Codes provide that arbitrators are eligible for the chairperson 
roster if they have completed chairperson training provided by FINRA 
and:
     Have a law degree and are a member of a bar of at least 
one jurisdiction, and have served as an arbitrator through award on at 
least two arbitrations administered by a self-regulatory organization 
in which hearings were held; or
     Have served as an arbitrator through award on at least 
three arbitrations administered by a self-regulatory organization in 
which hearings were held.\17\
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    \17\ See FINRA Rules 12400(c) and 13400(c).
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    Additionally, in customer disputes, chairpersons must be public 
arbitrators.\18\
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    \18\ See FINRA Rule 12400(c).
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    In February 2015, the Commission approved a proposal by FINRA to 
amend its definition of ``public arbitrator,'' \19\ The amended 
definition

[[Page 88721]]

took effect in June 2015,\20\ resulting in the reclassification of 
approximately 13.8 percent of public arbitrators as non-public 
arbitrators, and the rendering of 2.6 percent of its public arbitrator 
roster as temporarily disqualified or ineligible for service.\21\ Many 
of the arbitrators who were reclassified or disqualified had been 
chair-qualified prior to the amendment.\22\ Currently, FINRA's rosters 
contain approximately 6,750 arbitrators, of which 3,060 are currently 
classified as public. Of those classified as public arbitrators, 
approximately 1,000 are deemed chair-qualified.\23\
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    \19\ See Exchange Act Release No. 74383 (Feb. 26, 2015), 80 FR 
11695 (Mar. 4, 2015) (Order Approving Filing No. SR-FINRA-2014-028) 
(in part narrowing the public arbitrator definition by adding 
disqualifications relating to, among other things, affiliations with 
the securities industry concerning an arbitrator's family member or 
place of employment).
    \20\ See Notice, 81 FR 61288.
    \21\ See id.
    \22\ See id.
    \23\ See id.
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    FINRA contends that forum users have complained about the 
diminished availability of public chairpersons after the amendment to 
the public arbitrator definition. FINRA also states that forum users 
have complained of scheduling difficulties and additional costs 
associated with traveling chairpersons (i.e., public chairpersons that 
FINRA asks to travel to other hearing locations to expand the roster of 
available public chairpersons for a given location), as well as out-of-
town arbitrators' lack of familiarity with local venue customs and 
procedures.\24\ Moreover, FINRA states that it has had limited success 
in enrolling new public chairpersons, and that the need for public 
chairpersons could potentially surpass the availability of public 
chairpersons who meet the qualifications under the existing Codes.\25\
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    \24\ See id.
    \25\ See id.
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Proposed Rule Change
    FINRA is proposing to amend the eligibility requirements under the 
Codes for arbitrators who seek to qualify as chairpersons. The 
amendment would allow an attorney arbitrator to qualify for the 
chairperson roster if he or she completes chairperson training and 
serves as an arbitrator through award on at least one arbitration 
administered by a self-regulatory organization where hearings are held, 
instead of two arbitrations (as is currently required). FINRA is also 
proposing to replace the bullets in Rules 12400 and 13400 with numbers 
for ease of citation.
    FINRA states that reducing the case experience requirement for 
would-be arbitrators from two arbitrations to one arbitration could add 
more than 270 attorney arbitrators across 59 of its 71 hearing 
locations, potentially resulting in a nearly 30 percent increase in the 
number of arbitrators who might be eligible to serve as public 
chairpersons once they take chairperson training.\26\ FINRA also 
believes that the proposed rule change would increase the availability 
of local chairpersons for forum users, lowering instances in which 
chairpersons must travel, and ameliorating parties' concerns regarding 
out-of-town arbitrators.\27\
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    \26\ See id. at 61289.
    \27\ See id.
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III. Summary of Comments and FINRA's Response

    The Commission received five (5) comment letters on the proposed 
rule change,\28\ and a response letter from FINRA.\29\ Three commenters 
supported the amendment,\30\ and two generally supported the amendment 
while advocating for further action.\31\ FINRA's response to 
commenters' concerns and suggestions are incorporated below.
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    \28\ See supra note 5.
    \29\ See supra note 7.
    \30\ See Caruso Letter, Bakhtiari Letter, and FSI Letter.
    \31\ See PIABA Letter and GSU Letter.
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Comment Letters in Support of the Proposal
    As noted above, three commenters supported FINRA's proposed 
amendments to the Codes. One commenter stated that the proposal would 
``be a fair, equitable and reasonable approach that would facilitate 
the increased appointment of local chairpersons to arbitration panels 
and, at the same time, would reduce the necessity for the appointment 
of out-of-state chairpersons.'' \32\ A second commenter supported the 
proposed amendment on the ground that it ``would significantly increase 
the available number of arbitrators included on the Chair roster and 
represents an important step towards increasing the probability of 
drawing local chairpersons in suburban or remote hearing locations.'' 
\33\ A third commenter supported the proposal based on its belief that 
the requirement of a law degree and participation in one arbitration 
through award are reasonable criteria for a public chair.\34\
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    \32\ See Caruso Letter.
    \33\ See Bakhtiari Letter.
    \34\ See FSI Letter.
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Supportive Comment Letters Recommending Modifications to the Proposal
    Two comment letters recommended modifications to the proposal, 
while generally expressing support for the proposal. One commenter 
stated that investors would ``benefit from a larger pool of qualified 
public chairpersons'' and generally supported the proposed rule as ``a 
positive step in regards to increasing the number of arbitrators in 
proposed chair pools[.]'' \35\ Another commenter stated that it 
``applaud[s] FINRA's decision to expand the public arbitrator chair 
pool[.]'' \36\ However, both commenters raised additional concerns and 
suggestions for the proposed amendment.
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    \35\ See PIABA Letter.
    \36\ See GSU Letter.
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 Enhancing Transparency of the Arbitrator Selection Process

    One commenter advocated for greater transparency regarding 
arbitrators' backgrounds and qualifications, as well as greater 
transparency in the arbitrator selection process generally in order to 
improve investor confidence in FINRA arbitrators.\37\ According to this 
commenter, FINRA's current disclosure system, which provides 
information regarding arbitrators' education, employment history and 
potential conflicts, is insufficient to eliminate the appearance of 
impropriety and bias.\38\
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    \37\ See PIABA Letter.
    \38\ Id.
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    In response, FINRA stated that it produces a disclosure report 
reflecting the prior employment, educational history, and previous 
arbitration awards for every potential arbitrator during the 
appointment process.\39\ FINRA also requires arbitrators to either 
certify the accuracy of the information in the disclosure report or 
update the report when they are appointed to a case.\40\ In addition, 
FINRA reminds arbitrators on a quarterly basis to review their 
disclosure reports and revise them as needed. Moreover, FINRA stated 
that it is revising its disclosure reporting system to alert parties of 
the last time the arbitrator certified the accuracy of the information 
contained therein.\41\
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    \39\ See FINRA Letter.
    \40\ Id.
    \41\ Id.
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 Use of Out-of-Town Arbitrators and Recruitment Initiatives

    One commenter stated that the overall reduction in the number of 
eligible chairpersons has reduced the pool of local chairpersons, and 
caused FINRA to ask non-local chairpersons to travel to

[[Page 88722]]

multiple hearing locations.\42\ This commenter believes that the use of 
non-local arbitrators has resulted in inconvenience, delay, and 
additional costs to parties, and has led to a decrease in customer 
awards because of non-local arbitrators' purported bias in favor of the 
industry.\43\ For these reasons, the commenter suggested that, to the 
extent possible, FINRA should eliminate the use of non-local 
arbitrators and increase the size of regional pools--especially where 
out-of-state arbitrators regularly appear on public and chair-qualified 
ranking lists.\44\
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    \42\ See PIABA Letter.
    \43\ See id.
    \44\ See id.
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    In its response, FINRA stated that it uses arbitrators in 
neighboring hearing locations ``to ensure an effective ratio of 
available arbitrators to open cases in each location[.]'' \45\ For 
example, ``as an interim measure, FINRA took steps to bolster the pool 
of arbitrators in smaller hearing locations that were impacted by the 
amended public arbitrator definition by asking chairs from larger 
hearing locations . . . if they would be willing to serve[.]'' \46\ 
FINRA also stated, however, that it agrees that it should increase the 
size of its public arbitrator pool, and stated that it has been 
``actively recruiting new arbitrators, paying particular attention to 
locations with the greatest need.'' \47\
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    \45\ See FINRA Letter.
    \46\ Id.
    \47\ Id.
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 Additional Chairperson Training and Mentorship

    One commenter expressed the concern that the proposed rule change 
might sacrifice chairperson quality at the expense of chairperson 
quantity, as ``quality pools are paramount to a fair and equitable 
arbitration proceeding, as well as the public investors' confidence in 
the overall arbitration process.'' \48\ The commenter therefore 
recommended, in part, that FINRA adopt a ``Chairperson Mentor program'' 
to increase the quality of chair-qualified arbitrators.\49\
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    \48\ See PIABA Letter.
    \49\ Id.
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    Another commenter similarly asserted that, by expanding chairperson 
eligibility, the proposed rule change would reduce arbitrators' 
exposure to live proceedings prior to serving as a chair.\50\ To 
address this reduction in experience, the commenter proposed that FINRA 
``include in the Office of Dispute Resolution Chairperson Training a 
module or section that specifically addresses the procedural and 
substantive issues that regularly arise in live arbitration 
proceedings.'' \51\ Alternatively, the commenter proposed that FINRA 
require arbitrators to observe a live or mock proceeding before 
becoming eligible to serve as a public chair.\52\
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    \50\ See GSU Letter.
    \51\ Id.
    \52\ Id.
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    In response, FINRA stated that, earlier this year, it implemented a 
chairperson mentorship program to facilitate interaction between new 
chairpersons and experienced chairpersons.\53\ In addition, in November 
2016, FINRA provided arbitrators access to online workshops that 
address issues chairpersons regularly encounter.\54\ Moreover, FINRA 
stated that it regularly invites qualified arbitrators to complete 
chairperson training.\55\
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    \53\ See FINRA Letter.
    \54\ Id.
    \55\ Id.
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 Simplifying the Arbitrator Application Process

    One commenter expressed concern that the arbitrator application 
process is ``burdensome and intimidating and surely drives away many 
potential arbitrators which further weakens the number and quality of 
arbitrators available in the FINRA system.'' \56\ Accordingly, PIABA 
suggested that FINRA simplify the arbitrator application process.\57\
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    \56\ See PIABA Letter.
    \57\ Id.
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    FINRA responded that, in 2017, it plans to replace the ``time-
consuming'' ``Securities Disputes Experience'' section of the 
arbitrator application with a section that allows applicants to explain 
their securities disputes expertise and skills in narrative form.\58\ 
FINRA believes that this change will simplify the arbitrator 
application process.\59\
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    \58\ See FINRA Letter.
    \59\ Id.
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 Revisiting the ``Public Arbitrator'' Definition

    One commenter cited the 2015 amendments to the definition of 
``Public Arbitrator'' as a significant contributor to the reduction in 
the chairperson roster overall and disproportionately for claimants 
with smaller claims.\60\ For instance, GSU stated that there are only 
40 chair-qualified arbitrators in its primary hearing location, 
Atlanta.\61\ The commenter thus recommended that FINRA revisit the 2015 
amendments to the public arbitrator definition as a means for 
increasing the chairperson roster.
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    \60\ See GSU Letter.
    \61\ Id.
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    In response, FINRA stated that it had revisited the 2015 amendments 
to the arbitrator definitions and determined not to change the public 
arbitrator definition, as FINRA deemed it important for public 
arbitrators to have no significant affiliation with the financial 
industry.\62\ However, FINRA noted that a gap exists between the public 
and non-public arbitrator definitions, which excludes otherwise 
qualified individuals from service as arbitrators--often because of 
family or co-workers' affiliations.\63\ According to FINRA, in 
September 2016, its Board of Governors authorized FINRA to file with 
the Commission proposed amendments to Rules 12100 and 13100 of the 
Codes to revise the non-public arbitrator definition.\64\ These 
amendments would define a non-public arbitrator as a person who is 
otherwise qualified to serve as an arbitrator, and is disqualified from 
classification as a public arbitrator.\65\ By closing this gap, FINRA 
asserted that it could expand its roster of available arbitrators.\66\
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    \62\ See FINRA Letter.
    \63\ Id.
    \64\ Id.
    \65\ Id.
    \66\ Id.
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IV. Discussion and Commission Findings

    The Commission has carefully considered the proposal, the comments 
received, and FINRA's response to the comments. Based on its review of 
the record, the Commission finds that the proposed rule change is 
consistent with the requirements of the Exchange Act and the rules and 
regulations thereunder applicable to a national securities 
association.\67\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 15A(b)(6) of the Exchange 
Act,\68\ which requires, among other things, that FINRA's rules be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, and, in general, to 
protect investors and the public interest.
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    \67\ In approving the proposed rule change, the Commission has 
also considered its impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \68\ 15 U.S.C. 78o-3(b)(6).
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    As discussed above, the proposal would amend Rules 12400 and 13400 
of the Codes to allow an attorney arbitrator to qualify for the 
chairperson roster if he or she completes chairperson training and 
serves as an arbitrator through award on at least one arbitration 
administered by a self-regulatory

[[Page 88723]]

organization where hearings are held, instead of two arbitrations (as 
is currently required). It would also replace the bullets in Rules 
12400 and 13400 with numbers for ease of citation.
    The Commission has considered the five (5) comment letters received 
on the proposed rule change,\69\ along with FINRA's response to the 
comments.\70\ The Commission acknowledges the supportive commenters' 
positions that the proposal would ``be a fair, equitable and reasonable 
approach that would facilitate the increased appointment of local 
chairpersons to arbitration panels,'' \71\ that it ``would 
significantly increase the available number of arbitrators included on 
the Chair roster and represents an important step towards increasing 
the probability of drawing local chairpersons in suburban or remote 
hearing locations,'' \72\ and that the requirement of a law degree and 
participation in one arbitration through award are reasonable criteria 
for a public chair.\73\ However, the Commission also acknowledges 
commenters' concerns and recommended modifications to the proposal.\74\ 
These concerns and modifications are discussed below.
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    \69\ See supra note 5.
    \70\ See supra note 7.
    \71\ See Caruso Letter.
    \72\ See Bakhtiari Letter.
    \73\ See FSI Letter.
    \74\ See PIABA Letter and GSU Letter.
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 Enhancing Transparency of the Arbitrator Selection Process

    The Commission acknowledges the commenter's concern that FINRA's 
current disclosure system does not always eliminate the appearance of 
impropriety and bias in the FINRA arbitration forum, and agrees that 
transparency in the arbitrator selection process improves investor 
confidence in FINRA arbitrators.\75\ However, the Commission believes 
that FINRA's disclosure reporting system provides parties with a basis 
on which to identify potential arbitrator conflicts and biases. 
Moreover, the Commission believes that by reminding arbitrators to 
update their disclosure reports, and notifying parties of the last date 
an arbitrator certified the accuracy of the disclosure report, FINRA 
will further help ensure that parties have up-to-date information on 
which to base their arbitrator selections.
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    \75\ See PIABA Letter.
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 Use of Out-of-Town Arbitrators and Recruitment Initiatives

    The Commission acknowledges the commenter's concerns regarding the 
inconvenience, delay, and additional costs caused by the use of non-
local arbitrators.\76\ However, given the reported insufficient levels 
of local chairpersons in certain hearing locations,\77\ the Commission 
does not believe it is feasible or practical to eliminate the use of 
non-local arbitrators, as the commenter suggested.\78\ Instead, the 
Commission acknowledges the necessity of FINRA's policy of asking 
public chairs from larger, geographically proximate hearing locations 
to serve as chairpersons in regions with insufficient levels of local 
qualified chairpersons. The Commission additionally supports FINRA's 
increased arbitrator recruitment efforts, and anticipates that such 
efforts will eventually result in a broader, more diverse pool of 
arbitrator candidates.
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    \76\ Id.
    \77\ See FINRA Letter.
    \78\ See PIABA Letter.
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 Additional Chairperson Training and Mentorship

    With regard to commenters' concerns that the proposed amendment 
might decrease the quality and experience of arbitrator chairpersons at 
the expense of increasing the quantity of chairpersons, the Commission 
acknowledges their recommendation that a mentor program or additional 
trainings should be provided to chairpersons.\79\ The Commission 
generally believes that FINRA's implementation of a chairperson 
mentorship program, as well as its increased provision of and focus on 
arbitrator trainings should effectively address the commenters' 
concerns.
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    \79\ See PIABA Letter and GSU Letter.
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 Simplifying the Arbitrator Application Process

    The Commission acknowledges the concern expressed regarding FINRA's 
purportedly burdensome and intimidating arbitrator application process, 
and the potential deterrent effect the process might have on would-be 
arbitrator applicants.\80\ However, the Commission believes that a 
rigorous application process is necessary to verify the qualifications 
of arbitrator candidates. Furthermore, the Commission expects that 
FINRA's use of a narrative application section where applicants can 
explain their securities disputes expertise and skills will simplify 
the arbitrator application process without degrading the value of the 
elicited information, thereby addressing the commenter's concern.
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    \80\ See PIABA Letter.
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 Revisiting the ``Public Arbitrator'' Definition

    The Commission acknowledges the commenter's suggestion that FINRA 
reconsider the 2015 amendments to the public arbitrator definition in 
an effort to combat the resulting reduction in the chairperson 
roster.\81\ However, at the time the Commission approved the 2015 
amendments to the public arbitrator definition, the Commission 
determined that the approach proposed by FINRA was appropriate and 
designed to protect investors and the public interest, consistent with 
Section 15A(b)(6) of the Exchange Act and the rules and regulations 
thereunder.\82\ Accordingly, the Commission also gives due regard to 
FINRA's decision not to amend the definition of public arbitrator at 
this time.\83\ Nevertheless, the Commission will give appropriate 
consideration to any proposed amendments to FINRA Rules 12100 and 13100 
to revise the non-public arbitrator definition to eliminate any gaps in 
the Codes' arbitrator classifications that could expand its roster of 
available arbitrators.
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    \81\ See GSU Letter.
    \82\ See 80 FR 11695 at 11704-11705.
    \83\ See FINRA Letter.
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    Taking into consideration the comments and FINRA's responses, the 
Commission finds that the proposal is consistent with the Exchange Act. 
Specifically, the Commission believes that the proposal will help 
protect investors and the public interest by, among other things, 
broadening the roster of available arbitrator chairpersons, while 
preserving the quality of arbitrators who would serve as chairpersons. 
Furthermore, the Commission believes that FINRA's responses, as 
discussed in more detail above, appropriately addressed commenters' 
concerns and adequately explained FINRA's reasons for declining to 
modify its proposal. Accordingly, the Commission believes that the 
approach proposed by FINRA is appropriate and designed to protect 
investors and the public interest, consistent with Section 15A(b)(6) of 
the Exchange Act and the rules and regulations thereunder.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\84\ that the proposed rule change (SR-FINRA-2016-033) be, 
and hereby is, approved.
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    \84\ 15 U.S.C. 78s(b)(2).


[[Page 88724]]


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\85\
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    \85\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-29385 Filed 12-7-16; 8:45 am]
 BILLING CODE 8011-01-P
88720 Federal Register / Vol. 81, No. 236 / Thursday, December 8, 2016 / Notices

those that may be withheld from the Customer Code, ‘‘Codes’’).3 The the applicability of all provisions under
public in accordance with the proposed rule change would allow an the Code[s]. Such interpretations are
provisions of 5 U.S.C. 552, will be attorney arbitrator to qualify for the final and binding upon the parties.’’ 9 To
available for Web site viewing and chairperson roster if he or she completes facilitate the fair administration of
printing in the Commission’s Public chairperson training and serves as an proceedings in the FINRA forum,
Reference Room, 100 F Street NE., arbitrator through award on at least one arbitrators must possess sufficient
Washington, DC 20549 on official arbitration. The Codes currently require qualifications and participate in
business days between the hours of that an attorney must serve as arbitrator appropriate training 10—particularly
10:00 a.m. and 3:00 p.m. Copies of such through award on at least two where an arbitrator presides over the
filing also will be available for arbitrations in order to qualify for the proceeding as chairperson, with the
inspection and copying at the principal chairperson roster. authority to, among other things, direct
office of the Exchange. All comments The proposed rule change was witness appearances, order the
received will be posted without change; published for comment in the Federal production of documents and
the Commission does not edit personal Register on September 6, 2016.4 The information, and set deadlines in a
identifying information from public comment period closed on given case.11
submissions. You should submit only September 27, 2016. The Commission FINRA maintains a roster of non-
information that you wish to make received five (5) comment letters on the public arbitrators,12 public arbitrators,13
available publicly. All submissions proposed amendments.5 On October 14, and arbitrators who are eligible to serve
should refer to File Number SR– 2016, FINRA extended the time period as chairperson in each of its 71 hearing
NASDAQ–2016–162, and should be in which the Commission must approve locations.14 FINRA employs its
submitted on or before December 29, the proposed rule change, disapprove computerized Neutral List Selection
2016. the proposed rule change, or institute System to randomly generate lists of
proceedings to determine whether to potential arbitrators for each proceeding
For the Commission, by the Division of
approve or disapprove the proposed from these rosters.15 The parties then
Trading and Markets, pursuant to delegated
authority.13
rule change to December 5, 2016.6 On select their arbitrators through a process
November 22, 2016, FINRA responded of striking and ranking the names on the
Eduardo A. Aleman,
to the comment letters received in list generated by the Neutral List
Assistant Secretary. response to the Notice.7 This order Selection System.16
[FR Doc. 2016–29386 Filed 12–7–16; 8:45 am] approves the proposed rule change. The Codes provide that arbitrators are
BILLING CODE 8011–01–P eligible for the chairperson roster if they
II. Description of the Proposed Rule have completed chairperson training
Change 8 provided by FINRA and:
SECURITIES AND EXCHANGE Background • Have a law degree and are a
COMMISSION member of a bar of at least one
FINRA arbitrators possess the broad
jurisdiction, and have served as an
[Release No. 34–79455; File No. SR–FINRA– authority to ‘‘interpret and determine
arbitrator through award on at least two
2016–033]
3 See File No. SR–FINRA–2016–033.
arbitrations administered by a self-
Self-Regulatory Organizations; 4 See Exchange Act Release No. 78729 (Aug. 30, regulatory organization in which
Financial Industry Regulatory 2016); 81 FR 61288 (Sept. 6, 2016) (‘‘Notice’’). hearings were held; or
5 See Letters from Steven B. Caruso, Esq., Maddox • Have served as an arbitrator through
Authority, Inc.; Order Approving Hargett Caruso, P.C. (Aug. 31, 2016) (‘‘Caruso award on at least three arbitrations
Proposed Rule Change To Amend Rule Letter’’); Ryan K. Bakhtiari, Aidikoff, Uhl and administered by a self-regulatory
12400 of the Code of Arbitration Bakhtiari (Sept. 9, 2016) (‘‘Bakhtiari Letter’’); Hugh
Berkson, President, Public Investors Arbitration Bar organization in which hearings were
Procedure for Customer Disputes and
Association (‘‘PIABA’’) (Sept. 23, 2016) (‘‘PIABA held.17
Rule 13400 of the Code of Arbitration Letter’’); Nicole Iannarone, Asst. Clinical Professor, Additionally, in customer disputes,
Procedure for Industry Disputes and Geoffrey R. Hafer, Student Intern, Investor chairpersons must be public
Relating To Broadening Chairperson Advocacy Clinic, Georgia State University College
arbitrators.18
Eligibility in Arbitration of Law (‘‘GSU’’) (Sept. 26, 2016) (‘‘GSU Letter’’);
and David T. Bellaire, Esq., Executive Vice In February 2015, the Commission
December 2, 2016. President and General Counsel, Financial Services approved a proposal by FINRA to
Institute (‘‘FSI’’) (Sept. 27, 2016) (‘‘FSI Letter’’). The amend its definition of ‘‘public
I. Introduction comment letters are available on FINRA’s Web site
at http://www.finra.org, at the principal office of
arbitrator,’’ 19 The amended definition
On August 18, 2016, Financial FINRA, at the Commission’s Web site at https://
www.sec.gov/comments/sr-finra-2016-033/ 9 See FINRA Rules 12409 (Jurisdiction of Panel
Industry Regulatory Authority, Inc.
finra2016033.shtml, and at the Commission’s Public and Authority to Interpret the Code) and 13413
(‘‘FINRA’’) filed with the Securities and Reference Room. (Jurisdiction of Panel and Authority to Interpret the
Exchange Commission (‘‘Commission’’), 6 See Letter from Margo A. Hassan, Associate Code).
pursuant to Section 19(b)(1) of the Chief Counsel, FINRA, to Lourdes Gonzalez, 10 See Notice, 81 FR 61289.

Securities Exchange Act of 1934 Assistant Chief Counsel—Sales Practices, Division 11 See FINRA Office of Dispute Resolution
of Trading and Markets, Securities and Exchange Arbitrator’s Guide (Oct. 2016), at page 31, available
(‘‘Exchange Act’’) 1 and Rule 19b–4 Commission, dated October 14, 2016. at http://www.finra.org/sites/default/files/
thereunder,2 a proposed rule change to 7 See Letter from Margo A. Hassan, Associate arbitrators-ref-guide.pdf.
amend Rules 12400 of the Code of Chief Counsel, FINRA, to Brent J. Fields, Secretary, 12 For the definition of ‘‘non-public arbitrator,’’

Arbitration Procedure for Customer Securities and Exchange the Commission, dated see FINRA Rules 12100(p) and 13100(p).
November 22, 2016 (‘‘FINRA Letter’’). The FINRA
sradovich on DSK3GMQ082PROD with NOTICES

Disputes (‘‘Customer Code’’) and Rule Letter is available on FINRA’s Web site at http://
13 For the definition of ‘‘public arbitrator,’’ see

13400 of the Code of Arbitration FINRA Rules 12100(u) and 13100(u).
www.finra.org, at the principal office of FINRA, at 14 See FINRA Rules 12400(b) and 13400(b).
Procedure for Industry Disputes the Commission’s Web site at https://www.sec.gov/ 15 See FINRA Rules 12400(a) and 13400(a).
(‘‘Industry Code’’ and, together with the comments/sr-finra-2016-033/finra2016033.shtml,
16 Id.
and at the Commission’s Public Reference Room.
8 The subsequent description of the proposed rule 17 See FINRA Rules 12400(c) and 13400(c).
13 17 CFR 200.30–3(a)(12). 18 See FINRA Rule 12400(c).
change is substantially excerpted from FINRA’s
1 15 U.S.C. 78s(b)(1). description in the Notice. See Notice, 81 FR at 19 See Exchange Act Release No. 74383 (Feb. 26,
2 17 CFR 240.19b–4. 61288–61289. 2015), 80 FR 11695 (Mar. 4, 2015) (Order Approving

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88724 Federal Register / Vol. 81, No. 236 / Thursday, December 8, 2016 / Notices

For the Commission, by the Division of Percent DEPARTMENT OF STATE
Trading and Markets, pursuant to delegated
authority.85 Homeowners With Credit Avail- [Public Notice: 9808]
Eduardo A. Aleman, able Elsewhere ...................... 3.125
Culturally Significant Objects Imported
Assistant Secretary. Homeowners Without Credit
Available Elsewhere .............. 1.563 for Exhibition Determinations:
[FR Doc. 2016–29385 Filed 12–7–16; 8:45 am] ‘‘Shakespeare in Prague: Imagining the
Businesses With Credit Avail-
BILLING CODE 8011–01–P
able Elsewhere ...................... 6.250 Bard in the Heart of Europe’’ Exhibition
Businesses Without Credit Notice is hereby given of the
SUMMARY:
Available Elsewhere .............. 4.000
following determinations: Pursuant to
SMALL BUSINESS ADMINISTRATION Non-Profit Organizations With the authority vested in me by the Act of
[Disaster Declaration #14997 and #14998] Credit Available Elsewhere ... 2.625
October 19, 1965 (79 Stat. 985; 22 U.S.C.
NON-Profit Organizations With-
2459), E.O. 12047 of March 27, 1978, the
Minnesota Disaster #MN–00059 out Credit Available Else-
2.625 Foreign Affairs Reform and
where .....................................
AGENCY: U.S. Small Business For Economic Injury: Restructuring Act of 1998 (112 Stat.
Administration. Businesses & Small Agricultural 2681, et seq.; 22 U.S.C. 6501 note, et
ACTION: Notice. Cooperatives Without Credit seq.), Delegation of Authority No. 234 of
Available Elsewhere .............. 4.000 October 1, 1999, Delegation of Authority
SUMMARY: This is a Notice of the NON-Profit Organizations With- No. 236–3 of August 28, 2000 (and, as
Presidential declaration of a major out Credit Available Else- appropriate, Delegation of Authority No.
disaster for the State of Minnesota 2.625 257 of April 15, 2003), I hereby
where .....................................
(FEMA–4290–DR), dated 11/29/2016. determine that the objects to be
Incident: Severe Storms and Flooding. The number assigned to this disaster included in the exhibition ‘‘Shakespeare
Incident Period: 09/21/2016 through for physical damage is 14997B and for in Prague: Imagining the Bard in the
09/24/2016. Heart of Europe,’’ imported from abroad
Effective Date: 11/29/2016. economic injury is 149980.
for temporary exhibition within the
Physical Loan Application Deadline (Catalog of Federal Domestic Assistance United States, are of cultural
Date: 01/30/2017. Number 59008) significance. The objects are imported
Economic Injury (EIDL) Loan pursuant to a loan agreement with the
Application Deadline Date: 08/29/2017. James E. Rivera,
foreign owner or custodian. I also
ADDRESSES: Submit completed loan Associate Administrator for Disaster
determine that the exhibition or display
applications to: U.S. Small Business Assistance.
of the exhibit objects at the Columbus
Administration, Processing and [FR Doc. 2016–29382 Filed 12–7–16; 8:45 am]
Museum of Art, Columbus, Ohio, from
Disbursement Center, 14925 Kingsport BILLING CODE 8025–01–P on or about February 10, 2017, until on
Road, Fort Worth, TX 76155. or about May 21, 2017, at the University
FOR FURTHER INFORMATION CONTACT: A. of the Incarnate Word, San Antonio,
Escobar, Office of Disaster Assistance, SMALL BUSINESS ADMINISTRATION Texas, from on or about July 10, 2017,
U.S. Small Business Administration, until on or about September 30, 2017,
409 3rd Street SW., Suite 6050, Surrender of License of Small and at possible additional exhibitions or
Washington, DC 20416. Business Investment Company venues yet to be determined, is in the
SUPPLEMENTARY INFORMATION: Notice is national interest. I have ordered that
hereby given that as a result of the Pursuant to the authority granted to Public Notice of these Determinations
President’s major disaster declaration on the United States Small Business be published in the Federal Register.
11/29/2016, applications for disaster Administration under the Small FOR FURTHER INFORMATION CONTACT: For
loans may be filed at the address listed Business Investment Act of 1958, as further information, including a list of
above or other locally announced amended, under Section 309 of the Act the imported objects, contact the Office
locations. and Section 107.1900 of the Small of Public Diplomacy and Public Affairs
The following areas have been Business Administration Rules and in the Office of the Legal Adviser, U.S.
determined to be adversely affected by Regulations (13 CFR 107.1900) to Department of State (telephone: 202–
the disaster: function as a small business investment 632–6471; email: section2459@
Primary Counties (Physical Damage and company under the Small Business state.gov). The mailing address is U.S.
Economic Injury Loans): Blue Earth, Investment Company License No. 04/ Department of State, L/PD, SA–5, Suite
Freeborn, Hennepin, Le Sueur, 04–0304 issued to White Oak SBIC 5H03, Washington, DC 20522–0505.
Rice, Steele, Waseca. Fund, L.P., said license is hereby Mark Taplin,
Contiguous Counties (Economic Injury declared null and void. Principal Deputy Assistant Secretary, Bureau
Loans Only): of Educational and Cultural Affairs,
Minnesota: Anoka, Brown, Carver, United States Small Business
Administration. Department of State.
Dakota, Dodge, Faribault, Goodhue, [FR Doc. 2016–29401 Filed 12–7–16; 8:45 am]
Martin, Mower, Nicollet, Ramsey, Mark Walsh,
BILLING CODE 4710–05–P
Scott, Sherburne, Sibley, Associate Administrator for Investment and
Watonwan, Wright. Innovation.
sradovich on DSK3GMQ082PROD with NOTICES

Iowa: Winnebago, Worth. [FR Doc. 2016–29381 Filed 12–7–16; 8:45 am]
DEPARTMENT OF TRANSPORTATION
The Interest Rates are: BILLING CODE 8025–01–P
Federal Aviation Administration
Percent
Type Certificates 3A2 and A–772
For Physical Damage:
AGENCY:Federal Aviation
85 17 CFR 200.30–3(a)(12). Administration (FAA), DOT.

VerDate Sep<11>2014 17:28 Dec 07, 2016 Jkt 241001 PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 E:\FR\FM\08DEN1.SGM 08DEN1
Document Created: 2016-12-08 00:27:05
Document Modified: 2016-12-08 00:27:05
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		81 FR 88720