FINRA proposes rule change to expand party input on arbitrator selection

On August 12, 2026, FINRA filed a proposed rule change with the SEC (Release No. 34-106183; File No. SR-FINRA-2026-017) to amend the Customer and Industry Codes of Arbitration Procedure. The notice, published August 25, 2026 (FR Doc No: 2026-17549), seeks comment on revisions to Rules 12402, 12403, 13406 and 13411.

Under the current system, the Dispute Resolution Services algorithm generates three arbitrator lists for three-arbitrator panels: a Chairperson List of 10 public arbitrators, a Public List of 15 arbitrators for customer disputes (or 10 for industry disputes), and a Non-Public List of 10 arbitrators. Parties may strike up to four arbitrators from the Chairperson List, up to six from the Public List, and up to all 10 from the Non-Public List, then rank the remaining names.

The proposed amendment would give parties additional input when the combined lists lack enough arbitrators to fill an initial panel, and when an arbitrator must be replaced after appointment. The changes aim to replace the current "extended list" appointment - where the Director selects an arbitrator from a randomly generated list that parties must accept - with a process that allows parties greater selection authority.

FINRA notes that extended list appointments have proved unpopular because parties can only challenge those arbitrators for cause, limiting their role in selection. By revising the appointment and replacement procedures, the SRO seeks to address those concerns.

The rule change would affect all FINRA members, including those operating as funding portals or designated capital acquisition brokers, because those entities reference the impacted rules by incorporation.