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FINRA Proposes Rule Changes Relating To Subpoenas In Customer And Industry Disputes

Posted in Intra-Industry Arbitrations, Public Customer Arbitrations

On August 24, 2012, FINRA filed a proposed rule change with the SEC relating to when industry parties seek the appearance of witnesses or the production of documents from FINRA members and individuals associated with the members.  The new rules would require arbitrators, unless the circumstances dictate otherwise, to issue an order directing the production of documents or appearance of witnesses from non-party FINRA members without resorting to the subpoena process.  An arbitrator may issue a subpoena to non-party FINRA members if, for example, a firm failed to produce documents pursuant to an arbitrator’s order, or if a former associated person has left the industry and the arbitrator believes that an arbitrator order would not be effective.

The new rules would also address the issue of costs when a FINRA member and/or employee or associated person requests a subpoena directed to a non-party FINRA member and/or employee or associated person.  If an arbitrator issues a subpoena, the party requesting the subpoena shall pay the reasonable costs of the non-party’s production and/or appearance, unless the panel directs otherwise.  If a dispute arises as to the reasonableness of the costs, the arbitrator will determine whether production costs are reasonable.

Finally, FINRA is proposing to add new rules to provide a mechanism for non-parties to object to a subpoena or an arbitrator’s order.  The non-party may, within 10 days of service of the subpoena or arbitrator’s order, file written objections with the Director.  The party issuing the subpoena or arbitrator’s order would have 10 days from the receipt of the objections to respond.  After considering all objections, the arbitrator will rule on the objections.