February 21, 2020
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 February 7, 2020.
I am an attorney whose practice is exclusively devoted to the representation of individual and institutional investors in their disputes with the securities industry. Moreover, I am the current Chairman of FINRAs National Arbitration and Mediation Committee (NAMC) and a public member of the NAMC, the former Chairman of FINRAs Discovery Task Force Committee (DTFC), a former member of the Securities Investor Protection Corporation (SIPC) Modernization Task Force and a former President and current Director Emeritus of the Public Investors Arbitration Bar Association (PIABA).
It is my understanding that the proposed amendments would amend the Code of Arbitration Procedure for Customer Disputes and the Code of Arbitration Procedure for Industry Disputes (collectively the Codes) to apply minimum fees to requests for expungement of customer dispute information whether the request is made as part of the customer arbitration or the associated person files an expungement request in a separate arbitration.
It is my opinion that the proposed rule amendments would help to ensure that parties requesting expungement pay the fees intended for such requests under the Codes, that the fees charged when expungement is requested are more consistent, and that more expungement requests are heard by a three-person panel. These objectives would be achieved through the proposed application of a minimum filing fee for all expungement requests, irrespective of whether the request is made as part of the customer arbitration, or the associated person files a straight-in request, or the requesting party adds a small claim for damages in order to potentially manipulate and/or game the system.
It is my further opinion that the proposed rule amendments represent an equitable allocation of reasonable dues and fees against those who would either file or be a party to an expungement request, as is currently intended under the Codes, and that they would close gaps in the fee structure that have emerged in the existing expungement process that have been abused and exploited by parties seeking expungement, such as where parties add small dollar claims to their expungement requests to significantly lower the fees associated with their requests and to have their expungement requests considered and decided by only a single arbitrator.
In summary, these proposed rule changes would be a fair, equitable and reasonable approach that would expedite and facilitate the efficiency of the arbitration forum as well as the investor protection attributes that are all too often compromised through the improper application of the expungement process and, accordingly, should be approved by the SEC on an expedited basis.
Thank you for providing me with the opportunity to submit my comments on this rule filing.