General Securities Sales Supervisor (Series10) Practice Exam

According to FINRA, who is classified as a "public arbitrator"?

1. An individual associated with a member firm

2. An individual associated with a commodities firm

3. The Chief Financial Officer of a financial institution

4. A Chief Compliance Officer of a financial institution

The correct answer is: The Chief Financial Officer of a financial institution

A public arbitrator is defined by FINRA as someone who does not have any significant professional affiliations or connections to the securities industry, allowing for impartiality in the arbitration process. Typically, this means that individuals classified as public arbitrators have no current or past associations with member firms or other financial institutions that would create a conflict of interest in their arbitration decisions. The correct classification does not include individuals closely associated with financial entities, such as a Chief Financial Officer or a Chief Compliance Officer of a financial institution. These roles are directly tied to the operations of financial firms, making them unsuitable for the public arbitrator designation due to the potential for bias. The intention behind this definition is to ensure that the arbitrator's decisions are made without any undue influence from their affiliations with the financial industry. Thus, the reasoning behind identifying the Chief Financial Officer of a financial institution as a public arbitrator misinterprets the requirements of the role, which emphasizes a lack of ties to the industry, reinforcing the need for impartiality in arbitrations.