October 11, 2010
I write to oppose the proposed rule to permit arbitrators to make disciplinary referrals of brokers during the course of an arbitration proceeding. I oppose the proposed rule because of the included disqualification provision, which provides that if a mid proceeding referral is made any party could require the entire panel to be removed from the case.
As a result of this disqualification provision, claimants will be grossly prejudiced by a mid-arbitration referral. Very often, the first witness called by the claimant will be the offending broker. Thus, if the offending broker gives such unbelievable testimony or his testimony is found to show such egregious misconduct that the arbitrators are moved to make a disciplinary referral, the broker and his/her broker-dealer employer are rewarded by getting an entirely new panel to decide their fates. How is that result possibly fair to claimants?
Indeed, inasmuch as a referral is not a determination on the merits but rather only an indication of the panel's belief that the broker's conduct warrants further investigation by FINRA, in actuality a panel's determination NOT to make a referral is as significant as a panel's determination to make a referral. So why aren't claimants given the opportunity to remove a panel in the middle of a hearing every time the panel does not make a referral?
In sum, as written the proposed rule is grossly unfair to claimants and potentially rewards brokers who engage in egregious conduct. Unless the disqualification provision is removed, the SEC should reject the proposed rule.
STEINER & LIBO,
433 N. Camden Drive, Suite 730
Beverly Hills, CA 90210-4411