There was the time the Financial Industry Regulatory Authority offered a list of potential arbitrators to the parties in a dispute and two of the arbitrators were deceased.
And there was the case of the arbitrator who told Finra he was a lawyer, but wasn't. That guy managed to participate in 38 arbitrations over a 15-year period before Finra caught up with him, according to Reuters. In yet another case, an arbitrator misled Finra about the terms of his indictment by a grand jury.
You can now add to those stories the previously untold tale of the arbitrator who failed to say on his arbitrator-disclosure report that he had been accused of judicial misconduct and had been arrested for voyeurism. The charges against him are dated, and reports by psychologists 13 years after his arrest included remarks that his behavior was in "long term remission."
But lawyers for an investor who requested that he be jettisoned from a proposed arbitration panel say Finra should have known it was offering them an adjudicator whose judgment could be called into question. The story of Mark H. Adams is the latest example of Finra's inability to find and keep reliable information about the backgrounds of the people who sit as judge and jury on closed-door arbitration hearings.
"You need to give people confidence that if they're forced into arbitration, they at least have the information they need to make informed decisions," said Susan MacPherson, a jury consultant who has worked with the plaintiffs' lawyers at Piaba, a bar association of investors' lawyers, on a study of Finra arbitrators.
In December, Finra assigned Adams to a three-person panel that would oversee an upcoming arbitration brought by an aggrieved investor. It would have been the third Finra arbitration he'd participated in since 2010.
Apparently unbeknownst to Finra, Adams, a former court commissioner for the Washington State Court of Appeals, agreed in a stipulation with the state's Commission on Judicial Conduct on August 26, 1991 that he would no longer serve in any judicial office in the state because of what the commission called "acts of judicial misconduct" while he served as a commissioner. Not only did he fail to include that on his disclosure report, but Finra failed to pick it up in the vetting it describes as standard operating procedure before putting an arbitrator on a panel.
Finra disqualifies anyone who has been the subject of adverse disciplinary action by a professional body for non-technical violations, and so Adams should have disclosed the stipulation when he applied to be an arbitrator, said Joseph C. Peiffer, president of Piaba and one of the lawyers for the investor whose panel originally included Adams. If Finra had known about that history, it should have immediately disqualified him, Peiffer said.