April 11, 2008
I am an attorney who represents customers in FNRA arbitrations and other victims of consumer financial fraud. I write to comment on proposed Rule 12905 of the Code of Arbitration Procedure for Customer Disputes. On behalf of defrauded customers, I write to oppose this rule change as contrary to the protection of investors. The proposal seems to be yet another step in the court-ification of arbitration, contrary to any sense of fairness and due process. Especially in California, arbitrations through FNRA are more expensive, take more time, and have too many legal issues decided by non-lawyers without any review, than a case filed in Court and tried before a jury. The financial industry has chosen to create its own forum, run by its own organization, with its own industry members on the panels. This rule, if adopted, would only give FNRA members the ability to increase motion practice, adding actions in their own local court, which may be far from the consumer.
This rule will extend the increasing motion practice in arbitration to the post arbitration period. It will increase attorney fees for customers who prevail in arbitration and encourage proceedings to expunge claims when the customer is denied any relief (the majority). A public customer who has already been denied relief at the cost of thousands of dollars in forum fees will be subject to additional coercion and financial duress through continuing motions demanding expungement and/or the award of additional forum and attorney fees against the customer after the case is closed.
FINRA proposes to involve arbitrators in an entirely new post-arbitration motion practice that is entirely for its members' benefit and further abuses customers. The only stated problem this rule proposes to solve is several requests each year from parties in cases that have been closed for long periods of time.
In Court, there are no punishing forum fees if a party loses a case. Losing a case, of course, is not the same as a case that is frivolous or vexatious. At the certainty of additional attorney fees and risk of added forum fees, the customer would have little choice but to agree to broker expungement or allow an ex parte hearing on the matter without opposition. The public disclosure of individual broker records would become a further sham and state regulators would be denied a record of customer arbitration complaints. Expungement should done away with because it presents an untruthful history of a brokers claim history.
If FNRA is to administer an arbitration system, renewed efforts must be made to make the system fair without being a legalistic system, run by the brokers, with decisions made by non-judges, without any review, with countless motions from the brokers. The rule should not be amended as stated. Thank you for your consideration of this issue.
Joseph Fogel
Fogel Associates
Sherman Oaks, CA 91403