Wall Street veterans would no longer be allowed to act as arbitrators in many legal disputes between investors and their brokerages under a proposal that a U.S. regulator will present to its board on Thursday, a person familiar with the matter said.

The plan by the U.S. brokerage industry self-regulator, the Financial Industry Regulatory Authority (FINRA), would mean that investors could opt to have their cases heard by a panel of three so-called public arbitrators who would not include people who had past industry ties.

That would not only exclude former bankers and brokers but also others, such as lawyers who worked on behalf of brokerages, even for brief periods in their careers, the person said.

FINRA allows people who have been out of the industry for at least five years - but who may have worked in it as many as 20 years - to hear cases as public arbitrators.

Under the plan, these people could instead become "non-public arbitrators," required to have industry experience and typically hear disputes between industry entities.

A spokeswoman at FINRA, which regulates U.S. retail brokerages and runs the securities arbitration forum in which investors and brokerages must resolve their legal disputes, declined to comment.

Of FINRA's 6,400 arbitrators, more than 3,500 are deemed public arbitrators. While it is unclear how many public arbitrators have past industry ties, some lawyers have pegged the figure at about 1,000.

FINRA data shows that there is no significant difference in outcomes of cases decided by solely public arbitrators instead of those with public and non-public arbitrators.

But clients' attorneys have complained that the public arbitrators may have come from Wall Street and therefore have an industry bias. This new proposal would address that concern.

The move would require approval by FINRA's board and then by the U.S. Securities and Exchange Commission.