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FINRA Dispute Resolution Launches Large Case Pilot Program

The Financial Industry Regulatory Authority (“FINRA”) announced a new voluntary pilot program for the administration of arbitration cases geared towards cases involving large monetary damages of $10 million or more (“Pilot”).

Currently, the parties in any FINRA arbitration case may stipulate to deviate from the administrative procedures in the Customer and Industry Codes of Arbitration Procedure (collectively “Arbitration Codes”). According to FINRA’s news release, the goal of the Pilot is to give the parties in high dollar cases additional flexibility and more control over the administration of their case.

Who Can Participate?

Any FINRA case in which all parties are represented by counsel is eligible for the Pilot. FINRA points out that the Pilot is targeted at, but not limited to, cases with more than $10 million in dispute.

In order to participate in the Pilot, all parties must stipulate, in writing, to proceeding under the Pilot. Once the parties agree to proceed under the Pilot, the agreement to participate in the Pilot cannot be unilaterally rescinded.

How is the Pilot Administered?

A specially trained FINRA case administrator will hold an early administrative conference to assist the parties in developing a detailed plan for administration of the case. FINRA has also developed a specialized stipulation form for use by the parties to aid them in memorializing how the case will be administered.

Selection of Arbitrators

The parties in Pilot cases will be given multiple options regarding the appointment of arbitrators to their case. For instance, the parties can agree on one or more specific arbitrators to be assigned to their case, including non-FINRA arbitrators, or agree that the list of arbitrators provided by FINRA contain only arbitrators that possess certain qualifications or experience.

Discovery

Under the Arbitration Codes, certain forms of discovery, such as interrogatories, requests for admission, and depositions, are disfavored and generally not permitted, absent an order from the arbitrators. The Pilot permits the use of these discovery methods upon the agreement of the parties. In addition, the parties can stipulate to the use of a discovery arbitrator whose only task is to address discovery disputes.

Additional Costs of Proceeding Under the Pilot

Each separately represented party participating in the Pilot will be assessed an administrative fee of $1,000. In addition, if the parties agree to the use of an alternative location for the hearing, the parties will be charged the rental costs for the facility.

Due to the additional demands of deciding a larger and presumably more complex case, arbitrators will receive higher compensation for cases proceeding under the Pilot. The parties will be responsible to pay the compensation to the arbitrators that is over-and-above the honoraria paid to the arbitrators by FINRA under the Arbitration Codes.

The Florida securities lawyers at McCabe Rabin, P.A. represent investors nationwide in FINRA arbitration matters. Investors nationwide who have incurred recoverable investment losses due to specific failures by stockbrokers and brokerage firms, and who may have a FINRA arbitration claim, may contact the Florida securities lawyers at McCabe Rabin, P.A. for a free and confidential consultation by calling toll free at 877.915.4040 or by e-mail to kelly@mccaberabin.com.

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