July 30, 2008
For two years I have been speaking to representatives of NASD/FINRA, then the Chair of the Securities Industry Conference on Arbitration (SICA), then the SEC, about a problem in the Uniform Submission agreement. This agreement requires, among other things, (a) one to affirm that they have read all the rules and procedures governing the arbitration, but without (b) providing specific references to where those rules can be found. I have made numerous requests to NASD, now FINRA, urging such a proposal to fix this problem and they told me one was in the works. Now they have provided proposal SR-FINRA-2008-031 which I find to completely fail to address the problem.
The current practice is that in order to initiate an arbitration a participant must sign a "submission agreement" which states, among other things, that they have "read the rules and procedures of the sponsoring organization relating to arbitration". The problem is that no one could honestly say that they have read all the rules and procedures because nowhere are these rules made explicit: there are no specific document names, section names, page numbers, nor web URLs provided where these rules can be found.
When I initiated my original arbitration, I annotated the submission agreement to state which rules I had read in a good faith attempt to follow this instruction my submission agreement was then rejected on the grounds that I had written anything on it at all. When I made a request of Jean Feeney, Chief Council of the NASD, for a clear and comprehensive statement of, or references to, the rules, she could not provide one
After the proposed changes, the statement in question reads in part: "The parties hereby state that they or their representative(s) have read the procedures and rules of FINRA relating to arbitration....", where "or their representative(s)" has been added.
I had hoped the new proposed Submission Agreement would include some explicit, clear, and comprehensive statement on exactly where these "rules" can be found. Unfortunately, it does not. The only change is that I, as the petitioner, can either sign that I (the claimant) has read the rules, or my "representative" has read the rules. There is still no statement of where I am supposed to find these rules. I do not see how I can sign that I, much less someone else, has read the rules if I do not know what they are.
I think it is pretty clear that the citizen requesting the arbitration is the one making assurances, whether they have a representative or not however even if the proposed sentence in question were interpreted as saying that the representative were making assurances, it doesn't help. If I understand the purpose of FINRA correctly it is so unrepresented individuals can make claims without the requirement and cost of an attorney yet the new rule does not solve any of the problems for the unrepresented. Furthermore, I can see no way that any representative can sincerely state that they have read the rules and procedures when those are left undefined.
In short, my request is, if you want people to sign they have read something, you must give explicit document names and locations with page or section numbers and where the relevant text can be found.
Daniel S. Wilkerson