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FINRA has filed a proposed rule change to amend FINRA Rule 13201 of the Code of Arbitration Procedure for Industry Disputes to align the rule with statutes that invalidate predispute arbitration agreements for whistleblower claims. The proposed rule change also would make a conforming amendment to FINRA Rule 2263.

The Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Sarbanes-Oxley Act of 2002 (“SOX”) by adding a new paragraph (e) to 18 U.S.C. § 1514A3 to provide, among other things, that “No predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section.” Prior to the Dodd-Frank Act, it was FINRA staff’s articulated position that parties were required to arbitrate SOX whistleblower claims under the Industry Code.

The proposed rule change provides “A dispute arising under a whistleblower statute that prohibits the use of predispute arbitration agreements is not required to be arbitrated under the Code. Such a dispute may be arbitrated only if the parties have agreed to arbitrate it after the dispute arose.”

Check frequently for updates on the Dodd-Frank Act and other important securities law matters.

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