[ by Howard Haykin ] FINRA Dispute Resolution, Inc., has proposed a rule change that would amend its By-Laws and, in turn, clarify how Mediators are classified as either Public Members or as Industry Members.  It  comes down to those services provided by mediators, when they act in the capacity of mediator and are not representing parties in the particular case. The effective date of the proposed rule change will be 30 days after publication of a Regulatory Notice announcing the changes - the notice will be published within 60 days of SEC approval. Background. FINRA believes that mediators who otherwise are qualified to become Public Members of the National Arbitration and Mediation Committee (NAMC), should be eligible to serve as Public Members.  NAMC is a committee appointed by the Board of Directors of FINRA Dispute Resolution, Inc. (FINRA DR). Yet, that is not the case, because of the manner in which "Industry Member" and "Public Member" are defined in the current By-Laws of FINRA DR.  Obviously, a mediator can be selected to serve in a FINRA DR mediation that pits individual investors against industry parties, or a case that involves only industry parties.  Presumably the individual will serve in the role of mediator and will neither represent the investors nor the FINRA-registered individuals or entities. Issue of Tainted Revenue. The "fly in the ointment" is the fact that a mediator will receive revenue from FINRA registered persons or member firms.  FINRA does not believe that the source of such revenue should factor into a mediator's classification - again, so long as the mediator otherwise meets all other qualifications. As provided under the Plan of Allocation and Delegation of Functions by FINRA to Subsidiaries (Delegation Plan), the FINRA DR Board must appoint the NAMC, whose membership must consist of a majority of Public Members.  And, the By-Laws currently provides that a mediator could be classified as an Industry Member rather than as a Public Member for purposes of Committee participation - because of the services provided by a mediator to an industry party.  Some might interpret the By-Laws to say that, if a mediator derives any of his or her revenue from brokers or dealers, then that compensation earned as a mediator compromises the mediator's neutrality. FINRA, therefore, proposes to amend the By-Law definitions ... of Industry Members and Public Members so that services provided by mediators, while acting in such capacity and not representing parties in mediation, would not cause these individuals to be classified as Industry Members. To see which rules FINRA will amend, and to read the proposed new language that will be used, or to obtain further details on other matters addressed in the filing, go to:  [FINRA Rule Filing 12-40, 8/23/12].