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FINRA arbitrator's ouster brings many cases into question

As practitioners of public relations like to say, perception is reality. That's why voter polls are always big news in political reporting. They gauge public perception which translates into opinion, which politicians worry about even though they deny it.

Institutions are not immune from the perception-reality quandary, including those that participate in the securities industry. But they prefer not to be regulated by government, so many attempt some means of self regulation. That's what we see in the Financial Industry Regulatory Authority -- Wall Street's self-funded overseer.

As we've written about on other occasions in this blog, FINRA has its perception problems. The resulting reality is that there are many who are skeptical of its ability to fulfill its mission to provide unbiased recourse to victims of investment fraud and promote market integrity. 

FINRA may be in for another bit of shock in this regard. According to Reuters, there may be some 40 securities arbitration cases now in question because one of the arbitrators handling them allegedly lied about his credentials.

FINRA officials confirm that they removed the Santa Barbara individual from its list of arbitrators last year. A spokesperson says the man has claimed to be a lawyer and a member of the bar in California and several other states when he is not.

The revelation comes as consumer advocates fight to replace arbitration, which is currently the mandated remedy when investors file claims of stockbroker malfeasance.

One question being raised by some in the legal community is whether FINRA has an obligation to inform parties to cases handled by the arbitrator about his alleged misrepresentation. They also wonder if attempts could be made to challenge the findings of those cases.

Anyone with questions regarding such matters should consult with an experienced securities law attorney.

Source: Reuters, "Wall St. arbitrator booted for fake credentials heard nearly 40 cases," Suzanne Barlyn, March 25, 2014

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