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FINRA Files Proposed Rule Change Regarding Arbitration Subpoenas, Orders of Appearance of Witnesses and Production of Documents

On December 20, the Financial Industry Regulatory Authority filed a proposed rule change with the Securities and Exchange Commission to amend various FINRA Code of Arbitration Procedure Rules that govern objections in arbitration proceedings to subpoenas, orders of appearance of witnesses and production of documents by non-parties. Since non-parties to a FINRA arbitration do not have access to FINRA’s Dispute Resolution Party Portal, they currently are served using other, slower methods, including first class mail. Untimely delivery of subpoenas and orders can result in a non-party waiving its ability to object to such subpoena or order. In the event a non-party fails to make a timely objection, it must respond to the subpoena or order or risk incurring sanctions or disciplinary action.

To ensure that non-parties to a FINRA arbitration have adequate time to respond to subpoenas and orders, FINRA is proposing amendments to its Rules that would extend the period non-parties have to object to a subpoena or order from 10 to 15 days after the receipt of the subpoena or order and would exclude first-class mail as an option to serve documents on a non-party and for a non-party to object to subpoenas and orders. FINRA also proposed amendments to codify the current practice that the director of the Office of Dispute Resolution sends, at the same time, objections and responses to the arbitration panel after the reply date has elapsed, unless otherwise directed by the arbitration panel (i.e., the director sends the complete set of motion papers to the panel to ensure that the panel receives the advocacy positions of all parties at the same time).

If the SEC approves the proposed rule change, FINRA will announce the effective date of the rule change in a Regulatory Notice to be published no later than 60 days following such approval, and the effective date will be no later than 30 days following the Regulatory Notice announcing such approval.

The Proposed Rule Change is available here.

©2019 Katten Muchin Rosenman LLP


About this Author

Michael T. Foley, Katten, Lawyer, Finance, FINRA, Chicago
Special Counsel

Michael Foley represents broker-dealers, investment advisers and other financial services industry participants with respect to a broad spectrum of legal and regulatory matters arising under the federal securities laws.

Michael has nearly 20 years of experience in private practice and in-house at both a large, full-service broker-dealer and at an online discount broker-dealer, advising broker-dealers and other financial institutions regarding compliance with the federal securities and commodities laws, and with the regulations of the US Securities and Exchange...

Timothy Nolan, Katten Law Firm, Chicago, Corporate Law Attorney

Timothy Nolan concentrates his practice on transactional, corporate and regulatory aspects of financial services matters. Timothy is able to provide legal services to a wide variety of clients, including proprietary trading firms, hedge funds, broker-dealers, registered investment advisers, commodity trading advisers, financial institutions and general corporate clients.

Prior to joining Katten, Timothy served as the CEO and the president of the board of directors of a small commercial real estate company and spent 10 years in the scrap recycling industry, including several years as general manager of a mid-sized company. In his time in the scrap recycling industry, Timothy worked with traders, brokers, importers and exporters, and other industry professionals around the world relating to ferrous, non-ferrous and precious metal recycling, together with paper and plastic recycling.