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Finra is Working on These Improvements to the Arbitration Forum

By Crucial Clips     June 12, 2019
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FINRA 2019 Annual Conference, May. 15, 2019 

RITA RAAGAS DE RAMOS, SPECIAL PROJECTS MANAGER, FINANCIAL ADVISOR IQ: Hi. I'm Rita Raagas De Ramos from Financial Advisor IQ. And with me is Richard Berry, Director of Dispute Resolution at Finra. Rick, you've been at Finra in your current role for about five years now, and I know that one of your priorities has been to improve the diversity of the independent Finra arbitration and mediation forum. Can you tell us what you saw when you first took on that role?

RICHARD BERRY, EXECUTIVE VICE PRESIDENT, DIRECTOR OF DISPUTE RESOLUTION, FINRA: Sure. Well, we had made some progress with diversity, but I knew we needed to do a lot more. So a couple of key things: we dramatically expanded the number of staff working on recruitment and diversity, and we committed to not only work on diversity, but to publicly release the data about our arbitrators' demographic backgrounds. And we put that on the website. And we can show our progress, each year, how we're doing on diversity.

RITA RAAGAS DE RAMOS: Well, what kind of progress have you made over the past five years?

RICHARD BERRY: Well, we put that data on our website. And it's pretty impressive, I think. For example, we can tell you that last year, 15% of our new recruits, new arbitrators, were African-American, 8% were Hispanic-Latino, 5% were LGBT. So it's out on the website for everyone to see.

RITA RAAGAS DE RAMOS: Is there any particular group where you would like to see more progress?

RICHARD BERRY: We want to see progress across the board. It's important to have a diverse pool that represents investors and the United States, and we're really working on that right now. We're fully committed to arbitrator diversity.

RITA RAAGAS DE RAMOS: Can you give us some examples of actual things that you're doing in terms of outreach?

RICHARD BERRY: Sure, so we go to about 100 – we have about 100 groups that we work with. We go to conferences. We do mailings. We're heavily into social media, all with the idea of working towards diversity.

RITA RAAGAS DE RAMOS: Right, and do you think that you've achieved what you set out to do in the beginning?

RICHARD BERRY: I'm very pleased with what we've been able to do, but we have a lot more work to do. We'll be at this and continue at this. I don't see a time when we'll stop working at this.

RITA RAAGAS DE RAMOS: Let's split this a little bit. What is the impact of having a more diverse arbitrator pool to the industry, to the broker-dealer firms, to the brokers? And let's include the customers as well.

RICHARD BERRY: Sure. So you know we have cases that involve customers. We have cases that involve brokers and firms. And it's important for them to see a pool that represents their backgrounds. And every study that's ever looked at diversity shows that decision-making is better when you have a diverse group of people making the decisions. So it will improve the decision making as part of the arbitration process as well.

RITA RAAGAS DE RAMOS: What kind of feedback have you received since you upped the diversity of the pool?

RICHARD BERRY: We got especially a lot of positive feedback when we released our demographic data. We put it on our website. As far as I know, there's no other arbitration program that has released that kind of detailed demographic, group-by-group data on their websites. And, as I mentioned, we also could tell you how we did in the year previous. And we're putting year-by-year how we did so you can see our progress.

RITA RAAGAS DE RAMOS: Right. Before we go, I'd like to ask you about one of the biggest issues about arbitration, and that's unpaid arbitration awards. What is Finra doing now in terms of trying to solve this problem?

RICHARD BERRY: Right, well, as this is a problem that's bigger than Finra. But Finra is active in this, very active in this right now. We just released Regulatory Notice 19-17 regarding those firms who have a history of regulatory issues.

We're working on getting our MAP proposal, the Membership Application Program proposal, to tighten up those rules to deal with the issue of unpaid awards. And we're also working on our inactive party proposal, to give parties in arbitration more options when a firm or a broker becomes inactive during the life of the case. So, one last thing: We're having stakeholder meetings with a wide variety of groups looking at ways to solve this problem. It's bigger than Finra, and we need everyone to help us solve this problem.

RITA RAAGAS DE RAMOS: Thank you, Rick.

RICHARD BERRY: Thank you.