March 21, 2008
The purpose of this letter is to provide the Securities and Exchange Commission with comments on the above referenced proposed rule change which was filed by the Financial Industry Regulatory Authority, Inc. (FINRA) on February 7, 2008.
I am an attorney whose practice is exclusively devoted to the representation of public investors in their disputes with the securities industry. Moreover, I am the immediate-past President and a current member of the Board of Directors of the Public Investors Arbitration Bar Association.
For the reasons that will be set forth below, it is my opinion that the proposed rule change, as presently constituted, is a horrible solution for an issue that, as FINRA states in its own rule filing, only arises several times each year.
Accordingly, I would request that the Commission not approve the proposed rule change under any circumstances or on any conditions.
As presently constituted, the proposed rule change would permit parties to an arbitration proceeding to effectuate submissions to a panel of arbitrators, after the issuance of their arbitration award, in three limited circumstances.
It is, however, the second stated circumstance in the proposed rule change (which would permit a unilateral post-award submission by any party to the arbitration proceeding for any ministerial matter), that is untenable.
To begin with, the absence of a specific definition for the term ministerial is fraught with danger for public investors. For example, does the term ministerial include the misapplication of a legal principle or affirmative defense or the omission and/or miscalculation of mandatory statutory remedies or a multitude of other areas of inquiry that could potentially be deemed to be ministerial in nature?
I would respectfully submit that the term ministerial may, in fact, be incapable of being adequately defined in the context in which it has been presented in the rule filing.
Moreover, who is going to be charged with the responsibility of determining whether a post-award submission is ministerial or not? Will the determination be made by the dispute resolution staff at FINRA or will it be left within the domain of individual arbitration panels? In either event, it should be anticipated that there will be an uneven application of the term ministerial that will be subject to the personalities, experiences and geographical characteristics of the individual(s) who will ultimately given that responsibility.
Finally, and perhaps of the greatest importance to public investors, is the fact that permitting any single party to effectuate a unilateral post-award submission would, as FINRA states in its own rule filing, require permitting all of the other parties to then have the opportunity to submit their own written responses to the same as is its normal procedure.
This has the potential to lead to significant delays in the payments of arbitration awards to public investors irrespective of whether the post-award submissions were effectuated in good faith or as an attempt to delay the proceeding.
In summary, based on my experiences and just plain common sense, I cannot even begin to fathom how anyone could claim that the proposed rule change would either protect investors or be in the public interest if it were to be approved.
Accordingly, I would request that the Commission not approve the proposed rule change under any circumstances or on any conditions.