On July 15, 2022, FINRA filed Regulatory Notice 22-15 (available at https://www.finra.org/sites/default/files/2022-07/Regulatory-Notice-22-15.pdf) and announced the amendment of its Code of Arbitration for Industry Disputes to conform to the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, Pub. L. No. 117-90, 136 Stat. 26 (2022) (available at https://www.congress.gov/117/plaws/publ90/PLAW-117publ90.pdf). The amendments permit person with claims of sexual assault or sexual harassment to pursue those claims in court irrespective of any agreements otherwise mandating arbitration.
Background
FINRA members historically forced employees to arbitrate claims of sexual harassment or assault by use of agreements containing pre-dispute arbitration clauses. The pre-dispute arbitration clauses were typically contained within a Form U4, employment agreements or provisions within an employee manual that the employee was bound by.
Use of pre-dispute arbitration clauses for claims of sexual harassment or sexual assault was upended by the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021. FINRA has now changed its rules to comport with the Act.
Amendments to FINRA’s Rules
FINRA Rule 2263
Rule 2263 (titled: Arbitration Disclosure to Associated Persons Signing or Acknowledging Form U4) now includes a new Section 4 stating:
“A party alleging a sexual assault claim or sexual harassment claim that has agreed to arbitrate before the...
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