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FINRA currently allows non-attorney representatives to work with investors filing securities arbitration claims and throughout mediation. FINRA’s Board of Governors recently approved filing with the SEC amendments to the Codes of Arbitration and Mediation Procedure which would prohibit non-attorney representatives from practicing in the arbitration and mediation forums.
This move comes after FINRA issued a regulatory notice seeking comments on the efficacy of allowing compensated non-attorneys to represent parties in arbitration. FINRA received numerous comments which led to FINRA’s proposed rule change. Several comments noted that some non-attorney representatives employ inappropriate business practices, including requiring large non-refundable retainer agreements and pursuing frivolous or stale claims in an attempt to elicit settlements. Other comments pointed out that non-attorney representatives often operate illegally by practicing in hearing locations where state law prohibits such representation. Non-attorney representatives are also not held to professional standards like attorneys.
It is anticipated that FINRA will file the amendments with the SEC in the next few months. To the extent that our broker-dealer and registered representative clients have dealt with cases involving non-attorney representatives, including the filing of frivolous claims, we hope that the rule changes will resolve such issues.