On Wednesday, September 4, 2024, Malecki Law had their first all-around all-female Initial Pre-Hearing Conference (IPHC). An IPHC is a conference that takes place after arbitrators have been selected and provides a first impression for everyone involved. The participants of the IPHC included a panel of three female arbitrators, two female attorneys representing their female client, a female opposing counsel representing the Respondent firm, a female legal extern of the Claimant’s law office, and a female FINRA staff member who coordinated the call. This IPHC makeup of all women was a first for Malecki Law. This begs some questions – how far has the securities arbitration and litigation field come in fostering a more diverse and inclusive environment, and what steps are being taken to continue to facilitate this growth?
Early traces of Diversity, Equity, and Inclusion (DEI) can be tracked down to the mid-1960s when societal movements and legal transformations began to mold the corporate world. The early 2000s saw DEI becoming a business imperative, as it was not only ethical to recognize its importance but also aided in business success. McKinsey & Company, a multinational strategy and management consulting firm, revealed in its report that companies with higher levels of diversity are more likely to have financial returns above their industry medians. FINRA also stresses the importance of DEI to provide a fair and efficient environment for investors, brokerage firms, and registered representatives. FINRA has stated that it is committed to continuing efforts to cultivate diversity, inclusion, and equal opportunity within the industry. Although there exists the need and recognition for diversity within securities arbitration and litigation , has this recognition translated into concrete results?
Currently, FINRA has facilitated efforts to recruit new arbitrators, particularly those from diverse backgrounds to magnify arbitrator diversity. Methods employed by FINRA to achieve its goal include outreach to one hundred minority and women’s organizations, attending conferences where individuals of varied backgrounds attend, and hosting events with diversity-based organizations. According to FINRA’s 2023 Demographic Survey, women make up 45% of joined arbitrators, yet the overall roster of arbitrators consists of 35% women. This portrays a minor increase compared to the overall roster in the 2022 Demographic Survey, which saw 33% of female arbitrators. Further, as of 2023, men made up 53% of arbitrators who have joined and increased to 63% of arbitrators on the overall roster. Moreover, in terms of diversity amongst mediators, according to FINRA’s 2023 Demographic Survey, women made up 33% of the entire mediator roster, only a 4% increase from the previous year. So far, diversity amongst genders in the industry is only inching its way up.
While Malecki Law celebrates its first full female involved IPHC, one question remains – what is being done now? Malecki Law’s owner and founder, Jenice Malecki, alongside her Associates Jacqueline Candella and Adam Schreck, attended Securities Arbitration 2024 – a daylong conference hosted by the Practicing Law Institute (PLI). Click here to read more about the conference as well as the panel Ms. Malecki spoke on.
In the event handbook, FINRA Executive Vice President and Director of Dispute Resolution Service, Richard W. Berry emphasized that, “it’s vitally important that our pool of arbitrators reflects the varied backgrounds of the parties who use the FINRA arbitration forum.” The pools of arbitrators have been reflecting growth in diversity, yet arbitrator panels have been slow in following. At the conference, arbitrator and mediator, Joan Sterns Johnsen spoke on the panel for Diversity, Equity & Inclusion in FINRA Arbitrations – Is there an ethical obligation to adhere to DEI In the Wake of all the Backlash? In the event handbook, Ms. Johnsen flagged the issue of limited growth and cited the underlying cause as lawyers being risk adverse. Ms. Johnsen develops this by highlighting how neutrals who have been hired in the past are consistently and continuously hired. This is because diverse and newer neutrals are lesser known and can pose unknown risks. Others highlighted that lesser-experienced arbitrators could be more of a “peer” to those appearing before them, as well as may be less jaded. Lawyers were encouraged to hire lesser-known neutrals for smaller cases so that they may be discovered with a lesser degree of risk.
Overall, DEI is starting to show its impact within the securities arbitration and litigation space, but its momentum needs to continue. There needs to be new and innovative approaches in bolstering it. Ms. Malecki is an advocate for DEI and is not shy to speak on the topic or attend events that highlight novel approaches for the continued furtherance of diversity.
Contributions by Christina Harris, New York Law School Securities Arbitration Seminar and Field Placement Extern.