Legal News

O Happy Day! Finra Looking For (More Than) a Few Good Arbitrators

By Ashby Jones

A glance at Friday’s headlines portends only good things — great things! — for lawyers looking for work.

For starters, we’ve got the jobs report. The unemployment rate, it was announced on Friday, dropped unexpectedly from 10 percent in December to 9.7 percent in January. It’s only a matter of time — days probably — before those newly employeds start sending boatloads of new structured-finance work to law firms, heightening the need for more associates.

And there’s this: A WSJ story about the booming need for more arbitrators to help settle investor/broker disputes! Looks like Christmas has come early for the nation’s hand-wringing, sleep-deprived 3Ls!

Okay, okay. In case it wasn’t abundantly clear, we’re kidding. You’re all still exactly where you were yesterday: either thrilled to have a job or continuing to spend pointless hours scouring the same sad little list of jobs you scoured yesterday on Monster.com.

But that doesn’t negate the fact that Randall Smith’s WSJ article on Finra and arbitrators was pretty interesting.

Smith writes that so many investors have filed arbitration claims that Finra, the industry-funded machine for handling such disputes, is completely overloaded. To decide all the disputes, the Financial Industry Regulatory Authority has been forced to call in hundreds of extra arbitrators.

We’ve never done this on this kind of scale,” said Linda Fienberg, Finra’s president of dispute resolution.

Continues Smith:

Finra recently cast a dragnet for arbitrators as far away as Chicago, New York and Florida, imploring them to come to Atlanta, Birmingham, Ala., New Orleans, Orlando, Fla., and four other cities where arbitration hearings on the mutual funds are clustered.

As a result, Finra boosted the size of the pool of available arbitrators in each city to an average of 721 from the previous 87.

Morgan Keegan, an investment firm that Smith focuses on, has said investors were told bluntly in required disclosures that the funds in which investors got killed were risky and could lose some or all of their value. The firm is fighting hard against the complaints, trying to remove arbitrators who ruled against the firm in previous hearings, challenging awards in court and bringing in costly experts to testify in cases involving relatively small losses, according to lawyers for some investors.

“They’ve been fighting these hammer and tongs,” says Brian Smiley, an Atlanta lawyer who has represented more than 100 investors trying to recover more than $50 million from Morgan Keegan.

Full post as published by Law Blog - WSJ.com on February 05, 2010 (boomark / email).