The Financial Industry Regulatory Authority (FINRA) is requesting public input on ways to modernize and improve its arbitration forum. Throughout 2025, FINRA made multiple comment requests and is now asking stakeholders to weigh in on procedural rules, arbitrator selection and training, discovery practices, award administration, and other specified topics such as punitive damages and defamation claims.
The Comment period closes on May 1, 2026.
Revisiting Arbitration Rules
FINRA Rule 12200 (Mandatory Arbitration) requires customers to arbitrate disputes under FINRA’s Code of Arbitration when a written arbitration agreement exists or when it is requested by the customer. Some commenters propose allowing members to contractually agree to opt out of arbitration in situations involving high-value claims or disputes between institutional investors. Opponents argue that limiting arbitration could reduce investor protections. Historical data show that claims over $10 million are rare—just 1% of cases closed between 2016 and 2025—while 6% fell between $1 million and $10 million.
FINRA requests feedback on whether parties should be allowed to agree in advance to resolve disputes in alternative forums, and whether customers should have post-dispute choice of arbitration versus court. Rule 13200, which governs disputes between members or associated persons, is under similar review on whether specific types of disputes arising out of the business activities of members or associated persons are required to be arbitrated under the Industry Code.
FINRA’s Eligibility Rule currently bars claims where six years have passed since the event giving rise to the claim. Concerns were expressed that FINRA’s guidance regarding the eligibility rule is overbroad. Commenters are divided on whether this rule should be eliminated, clarified as a statute of repose, or amended to allow claims for ongoing damages or concealed harm. FINRA requests comment on whether it should eliminate the eligibility rule and rely solely on applicable statutes of limitations to determine claim eligibility, amend the rule to allow claims arising from events more than six years earlier if there are ongoing damages or concealed harm, and/or clarify the rule as a statute of repose, explicitly barring claims based on transactions or events that occurred more than six years before filing, regardless of discovery.
Prehearing Motions to Dismiss are generally limited and discouraged. Some commentators suggest expanding prehearing dismissal rights to improve efficiency, while others reject expanding prehearing dismissals emphasizing protecting investors. FINRA is seeking input on whether it should change the timing or expand the circumstances for prehearing motions to dismiss, and how to balance efficiency, fairness, and customer protection.
Arbitrator Selection and Training
Arbitrators are chosen from three rosters: public, non-public (industry-affiliated), and chairperson-eligible. Parties can strike certain arbitrators from the roster, including all non-public arbitrators. Concerns have been raised that the background of arbitrators is not diverse and that ability to strike all non-public arbitrators permits all-public panels. Commentor feedback includes broadening the definition of “public” arbitrator, limiting the removal of all non-public arbitrators, reallocating strike rights collectively, and expanding available arbitrators.
FINRA is also reviewing its arbitrator training programs. Basic training covers procedures and expungements, whereas advanced training is required for chairpersons and arbitrators handling complex product related matters and expungement cases. Commenters recommend more training for complex cases, specific claim types, and underperforming arbitrators. FINRA seeks input on whether additional training should be mandatory or voluntary.
Discovery and Hearing Efficiency
FINRA’s discovery rules, including the Discovery Guide and Document Production Lists, aim to streamline information sharing. Discussions regarding potential updates to FINRA’s discovery rules and procedures, including the Discovery Guide, remain ongoing with input from FINRA’s National Arbitration and Mediation Committee (NAMC). Proposed improvements include early “meet-and-confer” sessions, e-discovery standards, limits on discovery requests, and confidential disclosure of insurance coverage. FINRA requests feedback concerning the Discovery Guide, a process to assist arbitrators in resolving discovery disputes, and imposing limitations or heightened standards for discovery requests beyond the Discovery Guide.
FINRA is considering strengthening hearing oversight through central support resources for arbitrators, implementing more rigorous case management standards, and increased monitoring. It is also exploring technological improvements to the Dispute Resolution Portal to improve efficiency and user accessibility and seeks public feedback.
Punitive Damages and Explained Decisions
Arbitrators may award punitive damages, and 3% of awards between 1988 and 2025 awarded such. Feedback is divided: some call for restrictions on punitive damages due to the lack of procedural safeguards of court, whereas others support arbitrators to award the same remedies available in court. FINRA seeks input on punitive damage caps, safeguards, and potential appeals processes for punitive damages.
Explained decisions, currently optional, summarize the factual basis for awards. Arbitrators are permitted to write an explained decision on their own or upon the motion of a party. Arbitrators must provide an explained decision if jointly requested by all parties. Commenters suggest mandatory detailed explanations to improve transparency. FINRA is evaluating whether explained decisions should be required in all cases or certain categories, their potential impact on case timelines, and implications for arbitrator recruitment and compensation.
Arbitration Awards Online
All FINRA awards are publicly available through the AAO database. Suggestions include enhancing search functionality to match legal research platforms and allowing limited removal or redaction of information, particularly when the case was expunged from the Central Registration Depository (CRD).
Unpaid Awards
Although rare, unpaid awards remain a concern. Most unpaid awards involve former members or associated persons. Proposals to improve recovery include creating a national fund, requiring liability insurance, and expanding FINRA authority over owners and control persons. Concerns include fairness to compliant firms and potential moral hazards.
Form U5 Defamation Claims
Arbitration defamation claims involving termination language have drawn attention. Commenters recommend providing specialized arbitrator guidance, requiring explicit findings of falsity and malice before awarding damages, granting firms immunity, and allowing removal of demonstrably false complaints from Form U4 without formal expungement. Currently, FINRA can remove U5 information from CRD only when awards explicitly cite defamatory content. FINRA is seeking input on balancing accurate regulatory reporting with fairness to brokers, whether specialized arbitrator qualifications are needed, and whether immunity standards should be reconsidered.
Looking Ahead
FINRA’s request for comment represents an important opportunity for investors, firms, and associated persons to shape the future of securities arbitration. Input will help FINRA balance efficiency, fairness, and investor protection while modernizing its processes for today’s financial services landscape.