Federal Court’s Remand and Rejection of ‘Inscrutable’ FINRA Award Has Broad Implications

FINRA litigants and arbitrators alike should take note of a federal court’s decision rejecting an unexplained FINRA award when it was unable to discern its basis, notwithstanding that FINRA rules did not require an “explained” decision, and later vacating the explained award once it demonstrated the panel’s manifest disregard of the law. This decision has potentially far-reaching tactical and practical implications, and suggests that arbitrators must be prepared to support their awards whether or not the parties request an explained decision. Under FINRA dispute resolution rules, arbitrators are not required to issue an explanation of their decision unless requested by both parties. Code of Arbitration Procedure Rules 12904(g) (Customer Code), 13904(g) (Industry Code). Therefore, these “unexplained” awards are customarily devoid of any fact-based explanation, and even explained decisions need not contain legal analysis or damages…

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