News & Insights

Finra Seeks Comment On The Efficacy Of Allowing Compensated Non Attorneys To Represent Parties In Arbitration

The FINRA Codes of Arbitration and Mediation Procedure currently allow compensated non-attorney representatives (“NAR”) to represent clients in securities arbitration and mediation subject to some exceptions.  Some parties are represented by relatives or friends who assist with case preparation or presentation.  NAR firms typically provide public investors an alternative to representation by attorneys in disputes between investors and broker dealers. FINRA is conducting a review of the efficacy of continuing to allow such representation and is accepting comments from member firms and other interested parties.

This request for comment stems from FINRA’s recent review that showed the following NAR firm activities have taken place: 1) using the forum as a vehicle to employ inappropriate business practices; 2) requiring retainer agreements that reflect a non-refundable fee of $25,000.00; 3) representing parties in hearing locations where state law prohibits such representation or handling only small claims decided on written submissions to avoid hearing locations in which the unauthorized practice of law would become an issue; 4) signing required arbitration submission agreements with the name of the NAR firm to avoid naming an individual representative who could be engaging in the unauthorized practice of law; 5) pursuing frivolous or stale claims to attempt to elicit settlements; or 6) breaching confidentiality provisions in settlement agreements by posting a picture of the settlement check to market the NAR firm’s services.

FINRA believes NAR firms provide a service to public investors with small claims; however, the above allegations raise serious concerns.  For instance, there are no rules of professional conduct applicable to NAR firms’ activities, NAR firms are not subject to malpractice insurance requirements, and NAR firms are not subject to licensing boards.  We encourage our clients who may be impacted by any proposed rule changes restricting NAR firms in FINRA arbitration to review Regulatory Notice 17-34,, and submit their comments to FINRA by December 18, 2017.