The Securities and Exchange Commission (“SEC”) has approved amendments to Rule 13201 of the Financial Industry Regulatory Authority (“FINRA”) Code of Arbitration Procedure for Industry Disputes (“Industry Code”).
Amended Rule 13201 states that parties are no longer required to arbitrate whistleblower claims arising under the Sarbanes-Oxley Act of 2002 (“SOX”) or any other statute that prohibits the use of predispute arbitration agreements for whistleblower claims. The amendment came about because of a paragraph added to SOX by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Dodd-Frank stated that no predispute arbitration agreement shall be valid or enforceable if it requires arbitration of a dispute arising under SOX.
Prior to the amendment, all employment disputes between associated persons and the FINRA member firms that employed them, other than statutory employment discrimination claims, were required to be arbitrated before FINRA under the Industry Code. Rule 13201 already exempted statutory employment discrimination claims from the mandatory arbitration provisions of the Form U4.
The new amended Rule 13201 indicates that disputes arising under a whistleblower statute that prohibits the use of predispute arbitration agreements may only be arbitrated if the parties agreed to arbitrate it after the dispute arose.
Amended Rule 13201 is effective on May 21, 2012.