August 24, 2010
I agree with your goal to expedite the arbitration process. However, the burden you are placing on the individual investor to produce the discovery documents will not expedite. Instead it will slow the process as the investor has to go through years of financial documents. It will also slow the other side since they then have to review and possibly cross-examine on each document. Since many of these financial documents will have no bearing on the case, it will be a detriment to the entire process instead of a benefit.
I think taking the discretionary control out of the FINRA arbitrators hands is a good thing, generally. However, the arbitration process requires good judgment and this good judgment must start with the discovery process. The arbitrator must judge what facts supported by documents are relevant to each individual case. It will take time but not as much time as producing and then reviewing boxes of financial documents not relevant.
I encourage the SEC to not accept the long list of "presumptively relevant" documents to be produced by the investor in arbitration. The burden would not be fair to the investor unless truly relevant and that cannot be determined automatically for ALL cases before even filed. To do so would be like saying the fact that you stole a $10 item when you were 16 is relevant in all criminal prosecution cases.
What is relevant should be based on the issues in the filed case. Is the fact that you owned a business in college typing up resumes to earn your way through college relevant when 30 years later you had investment losses through misdealings? It may be so determined to be relevant but it should not be predetermined to be relevant. Boundaries are needed and an overly broad discovery mandate will burden the process instead of expedite the process.