Customers have a right to request arbitration at a FINRA arbitration forum at any time. In a Regulatory Notice, FINRA stated that customers do not forfeit their rights under FINRA rules by entering into any agreement with a substituted forum selection provision that specifies "another dispute resolution process or an arbitration venue other than the FINRA arbitration forum."
"FINRA rules do not permit member firms to require associated persons to waive their right to arbitration under FINRA rules in a predispute agreement." FINRA cautioned that if a member firm fails to comply with FINRA rules relating to predispute arbitration agreements with either customers or associated persons, it would be in violation of FINRA rules and subject to disciplinary action.
FINRA expressed concern that member firms are including provisions in predispute agreements that have the effect of waiving the associated person's right to obtain FINRA arbitration of any disputes arising out of the agreement. FINRA emphasized that:
FINRA Rule 13200 specifically states that industry disputes must be arbitrated at FINRA, except as otherwise provided in the Industry Code. Thus, any attempt to override this requirement of FINRA Rule 13200 in a predispute agreement by more specific contractual terms would violate FINRA rules.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
