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FINRA Increases Arbitrator Pay- Passes Costs to Parties

According to Regulatory Notice 14-49 (“RN 14-49”) issued by the Financial Industry Regulatory Authority (“FINRA”), FINRA is increasing the pay for arbitrators assigned to hear FINRA cases and passing the costs of the increase on to the parties.  The new rule applies to all cases filed on or after December 15, 2014, it is not retroactive.

FINRA states that the arbitrator pay increase will be funded through higher surcharges and processing fees assessed to FINRA member firms, as well as, an increase in the claim filing fees paid by investors, FINRA member firms, and associated persons of FINRA member firms who initiate claims seeking more than $500,000 in damages or an unspecified amount of damages.  In addition, the per session cost of hearings with three arbitrators in claims of more than $500,000 will also be raised.

Currently, the honoraria paid to FINRA arbitrators is $200 for each hearing session in which the arbitrator participates, either by telephone or in-person.  One hearing session is any hearing lasting up to 4 hours.  Therefore, a full day of hearings lasting 8 hours is considered by FINRA to be 2 sessions. Under the new rule, the arbitrators will be paid $300 for each hearing session or $600 for a full day consisting of 2 sessions.  In addition, the Chairperson of the arbitration panel will be paid an additional $125 per day, up from the current $75 per day.  The pay for deciding a simplified case in which no hearings are conducted has also been increased from $125 to $350.

In order to fund the honoraria increase, RN 14-49 indicates that the surcharge and process fees assessed against FINRA members only will increase in cases seeking damages over $250,000.  Member firms currently pay a pre-hearing process fee and a hearing process fee.  The amended rule combines both into one processing fee that will be due at the time the parties are sent the arbitrator lists.

All FINRA claimants, regardless of type, will pay an increased claim filing fee for all cases over $500,000 or with an unspecified amount of damages.  Each hearing session fee, which is based on the non-refundable portion of the claim filing fee, will also increase as a result.

The new fees will not apply to cases filed prior to December 15, 2014.