Published on:

FINRA Will Conduct More Frequent Background Checks On Active Arbitrators

The Financial Industry Regulatory Authority, Inc. (“FINRA”) announced that it will conduct more frequent background checks on an annual basis on arbitrators to be appointed to new cases. Previously, FINRA only conducted background checks on individuals who were applying to be FINRA arbitrators for the first time. Recently, a public arbitrator, Demetrio S. Timban Jr., appointed in a major case failed to disclose his own legal issues. Timban was appointed to preside over an arbitration filed by Athena Venture Partners LP against Goldman Sachs & Co. regarding alleged investor fraud in a private investment fund for an approximate $1.4 million in damages. During the arbitration process, FINRA sent the parties updated background information on the presiding arbitrators, which for the first time disclosed that Arbitrator Timban was arrested and indicted in New Jersey in October 2011 for practicing law in the state without being licensed there. According to media reports, the charges against Timban were ultimately dropped, however Timban also had legal troubles in the state of Michigan for writing checks without sufficient funds. After this disclosure, the parties in the above referenced arbitration did not challenge the Arbitration Panel’s composition and permitted Timban to remain on the case. The Arbitration Panel rendered an Arbitration Award denying the claims. Timban, however, was the only arbitrator out of the three panel members who did not sign the award. FINRA spokeswoman, Michelle Ong, stated, “[t]he procedures we are putting in place will help ensure not only that parties receive the information that they should but also that FINRA’s active arbitrators are eligible to serve.”

Lax & Neville LLP has nationally represented small broker-dealers, financial services professionals and securities industry companies in regulatory matters and securities-related and commercial litigation. Additionally, Lax & Neville has extensive experience in successfully prosecuting claims on behalf of customers who have suffered losses. Please contact our team of attorneys for a consultation at (212) 696-1999.

Contact Information