July 16, 2008
The purpose of this letter is to provide the Securities and Exchange Commission with comments on the above referenced proposed rule change which was filed by the Financial Industry Regulatory Authority, Inc. (FINRA) on June 19, 2008.
I am an attorney whose practice is exclusively devoted to the representation of public investors in their disputes with the securities industry. Moreover, I am the immediate-past President and a current member of the Board of Directors of the Public Investors Arbitration Bar Association (PIABA).
Subject to consideration of the comments set forth below, it is my personal opinion that the proposed rule change, which would amend the Uniform Submission Agreement that all parties are purportedly required to sign in connection with the arbitration of a securities dispute, should be approved by the Commission.
As noted by FINRA in its rule filing, the Uniform Submission Agreement is a contractual agreement that both claimants and respondents must sign prior to entering into arbitration. It is through the execution of the Uniform Submission Agreement that the parties agree to submit to the arbitration process and to be bound by the determination that may be rendered thereafter by the arbitrator(s).
With respect to the obligations of a claimant in an arbitration proceeding, Rule 12302(a) of the Customer Code and Rule 13302(a) of the Industry Code both mandate that a claimant must file a signed and dated Uniform Submission Agreement and a Statement of Claim in order to initiate an arbitration proceeding.
Similarly, with respect to the obligations of a respondent in an arbitration proceeding, Rule 12303(a) of the Customer Code and Rule 13303(a) of the Industry Code both mandate that a respondent must sign and file a Uniform Submission Agreement and a Statement of Answer within 45 days of receipt of the Statement of Claim.
Unfortunately, notwithstanding the preceding procedural predicates, a drastic disparity has been permitted to exist with respect to the obligations of a claimant and a respondent to sign and file their respective Uniform Submission Agreements.
In fact, although FINRA will not even begin to process an arbitration claim without a Uniform Submission Agreement that has been signed by a Claimant, far too many respondents continue to submit Statements of Answer, participate in the selection of arbitrators, and otherwise partake in arbitration proceedings even though they have failed and/or refused to sign and submit the required Uniform Submission Agreement.
For example, a cursory review of arbitration awards issued within the past thirty (30) days or so, indicates that one (1) or more respondents failed and/or refused to ever sign or submit their required Uniform Submission Agreements in numerous proceedings. See, e.g., Award Nos. 06-02116, 06-05045, 07-01052, 07-01346, 07-01377, 07-01850, 07-02000 and 07-02933
Moreover, if the period of award review were to be extended even further, there are literally hundreds upon hundreds of additional arbitration awards which indicate that one (1) or more respondents failed and/or refused to ever sign or submit their required Uniform Submission Agreements.
Unless and until respondents are barred from all participation in an arbitration proceeding (non-recognition of their Statement of Answer, inability to participate in the selection of arbitrators, etc.) if they fail and/or refuse to sign and submit their mandatory Uniform Submission Agreements, the disparate treatment of claimants and respondents will unnecessarily continue to exist.
Thank you for providing me with the opportunity to submit my comments on this proposed rule.