March 20, 2009
I write as a lawyer who has practiced in a litigation practice involving may issues for nearly 40 years. I sometimes have to figuratively pinch myself when I think about industry mandated arbitration in broker dealer cases. They are not voluntary for customers; they are required. There is no bargain between the parties on this; if you want to participate in the stock market you must arbitrate. If arbitration were a fair, inexpensive, and equitable means of pursuing one’s rights, the lack of choice would be less offensive. The proposed discovery rule changes embody the fundamental unfairness of the system. I think I can say that few Courts in America would require production of documents going back potentially 10 or 15 years; few would allow such production when the documents are not probative of any issue in dispute in the case. Why indeed would a party be required to produce her tax returns in a case where the claim is that a broker committed fraud? In a claim under a state securities statute, what is the relevance of her financial condition 10 years ago? Where there is a claim for breach of a fiduciary duty owed by a broker or firm, why should the firm be able to comb over all of his brokerage statements from other firms…. from many years ago. Lawyers are resourceful folks; experience tells me that if out of this mass of information one of them can find some evidence that is not relevant but harmful, evidence that shows the customer in a bad light, that the lawyer will almost always try mightily to do just that. Sadly, I believe these new rules will not simplify these cases and will not make them more equitable. What is the supposed justification for the increased production? The quotes from the Commission’s March 6 Release are Orwellian. They say the increased production ”..will provide parties with a broader understanding of a customer’s financial status during the relevant period”; that a “more complete history of the customer’s investing history” will result. Unless those things are relevant to the specific claims being made why should a BD be able to have such information? If this were a court proceeding, of course, there would be trained judges and appeals to protect things like privacy and due process that investors should not be required to give up because they have suffered a loss at the hands of their broker. Please reconsider these changes. They will keep all but the very hardy from even pursing their rights; I don’t believe for a second that that is the intent of this system approved by the SEC.
John C. Taylor, Jr., Esquire
Taylor, Day, Currie, Boyd & Johnson
50 North Laura Street
Suite 3500
Jacksonville, Florida 32202