April 3, 2009
I am an attorney who has represented brokers, who is a FINRA-DR Public Arbitrator, and a member of PIABA since 2003.
While many provisions of this proposed rule change are malodorus, my comments flush only a few, of numerous propositions, which must not float.
If markets are to be free, then let redress to markets be free. Arbitration should not be compulsory, but, if investors are compelled to arbitrate, then open this system to transparency, and empower finders of fact to render equitable decisions. To this end I remark as follows:
Proposed List 2 (Documents and Information to Be Produced in All Customer Cases by Customer)
The time for a broker to know its customer is not during arbitration. It is required to know its customer when the first recommendation is made.
The industry-cited statute of limitations is 6 years from the act that gave rise to the grievance. The industry cites language to estop the customer from raising grievances that may arise 6 years after the purchase/sale is made.
AS PROPOSED, FINRA would require investors to provide copious documents for a period 5 years prior to the "first transaction at issue". OK, then make the eligibility requirement 11 years. For this rule to be passed, FINRA must repudiate its guidance concerning the eligibility requirement. In the alternative, I request that FINRA declare that buy and hold strategies are not subject to any eligibility requirements. Otherwise SEC should reject FINRA'S rule change request, and/or impose upon FINRA and its members revised transparency obligations.
Moreover, Section List 2, (12) requires investors to identify loan information et alia. I would only support such a requirement if the industry, by FINRA or SEC decree, was compelled to produce all of its relevant employees' tax returns (including but not limited to, Forms B, D and E) documenting their investments, as well as documentation which illuminates the firms' receipt of tax-payer funding which has kept said firms afloat, via TARP and/or any other source of bailout, whereby the firm has remained viable but for government intervention.
-Theodore M. Davis, Esq.
The New York Irish Center Building
1038 Jackson Avenue
Long Island City, NY 11101