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October 3rd, 2018
securities
THE SEC APPROVES FINRA RULES AMENDMENTS FOR SIMPLIFIED ARBITRATIONS

The SEC recently approved a rule amendment to create an intermediate form of adjudication for small claims.  The proposal amends Rules 12600 and 12800 of the FINRA Code of Arbitration Procedure for Customer Disputes and Rules 13600 and 13800 of the FINRA Code of Arbitration Procedure for Industry Disputes.  The amendments provide parties with claims of $50,000.00 or less an opportunity to argue their cases before a single arbitrator in a shorter, more limited telephonic hearing format.

The amendments to the Rules now allow for two options.  Option One follows the regular provisions of the Codes relating to prehearings and hearings, including all fee provisions.  If parties choose Option One, they will continue to have in-person hearings without time limits, and they will continue to be permitted to question opposing parties’ witnesses.

Option Two will be the new Special Proceeding subject to the regular provisions of the Code relating to prehearing and hearings, including fee provisions, with the following differences: an arbitrator will hear the case by telephone conference call unless all parties agree as to another method of appearance; each side will have two hours to present their cases and one-half hour for rebuttal and closing statements; arbitrators will have up to three hours to ask questions; the hearing will be completed in one day with no more than two hearing sessions; parties may not question an opposing parties’ witnesses; and parties may not call an opposing party as a witness.

FINRA’s amendments to these Rules became effective on September 17, 2018 for cases filed on or after that date and provide an option for cases involving simple claims where the amount requested is low.  Because Claimants’ counsels are interested in cost savings for these smaller claims, we expect this option will be utilized frequently.  Not only will it be cheaper, but it will protect Claimants from cross examination, while giving Claimant’s attorney the ability to put in whatever alleged evidence it desires and actually argue their case to the Arbitrator.
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