April 10, 2008
April 10, 2008
Comment on SR-FINRA-2007-21
I am an attorney licensed to practice law in California and Wisconsin. Since 1994, the vast majority of my practice has been and continues to be representing investors in arbitrations pending at FINRA, the (former) Pacific Exchange and the (former) New York Stock Exchange, as well as in related litigation. I am also a FINRA public arbitrator, and a former arbitrator for the Pacific Exchange.
Arbitration was intended to be an efficient, simple method of dispute resolution. It should not be transformed into the equivalent of a court proceeding but without a jury trial. Adding additional procedures and processes – such as dispositive motions – is contrary to what makes arbitration an effective alternative to court.
Prior to merging with the NASD to form FINRA, the NYSE arbitration department took a very simple, very clear position on dispositive motions: the parties were entitled to an in-person evidentiary hearing. Arbitrators could not grant a dispositive motion without first holding an evidentiary hearing.
FINRAs current proposed rule on motions to dismiss certainly goes far along the road to further the goals of arbitration by eliminating many of the frivolous motions that have become routine in FINRA arbitrations. The proposal is clearly a product of a lot of thought , effort and compromises between representatives for investors and for the securities industry.
However, the structure and length of the proposed rule may be difficult for many arbitrators to understand or administer. Its complexity may also lead to interpretations that were neither intended nor anticipated. The proposed rule also expressly permits certain types of dispositive motions to be decided without an evidentiary hearing, which detracts from the core purpose of arbitration.
I urge the SEC to continue with the NYSE arbitration departments approach to dispositive motions, and enact a rule which is very simple, very clear and very easy to administer: arbitrators may not grant a dispositive motion until after an in-person evidentiary hearing, unless such a hearing is waived by the parties.
Thank you for your consideration of this comment.