August 27, 2010
I hereby offer the following comments in response to the proposal to amend the Discovery Guide used in FINRA arbitrations.
I am a securities attorney who represents both individual investors through the FIRNA arbitration system and the industy in matters involving compliance and regulatory enforcement issues. I see the proposal to amend the Discovery Guide as tipping an already unbalanced system further away from protecting investors and more toward assuring better results for the industry.
Arbitrators are not currently trained regarding the use of their discretion relative to the Discovery Guide. Oftentimes the arbitrators defer to the lists and do not allow investor participants the scope of discovery they require. In many cases the investor cannot obtain sufficient discovery to establish a pattern of wrongdoing (or more importantly to establish a scheme or artifice to defraud). Certainly this information is relevent in product cases.
The current system largely ties the hands of what investors can get through discovery while at the same time allowing firms access to information of a very personal nature and that which is arguably not relevent. Therefore, the investor is actually harmed coming and going by the current system.
The firms are the entity with the documents and with the requirements to save and store such information. Yet when it comes to the FINRA discovery guide, investors oftentimes receive little more than account statements and opening accunt documents (things they already have).
The solution is not more lists (or more items on the lists). It is proper training of the arbitrators to allow for the inclusion and production of all relevent information by the firms to the investor.
Thank you for the opportunity to comment.