Securities Arbitration – FINRA Withdraws Discovery Proposal

Investors who file securities arbitrations received a quiet victory at the end of May. FINRA, the Financial Industry Regulatory Authority, quietly withdrew a proposal to the discovery rules in securities arbitrations that would have obliged investors to disclose even more of their financial histories than the present rules provide.

FINRA’s proposal was filed with the SEC in March and intended to increase the responsibilities of investors who file customer arbitrations to produce, among other things, complete tax returns (instead of certain pages and schedules) for five years prior to the first transaction identified in the statement of claim (instead of three years).

The SEC received more than 50 comment letters about the proposal, mostly from attorneys who represent investors who objected. FINRA filed a two-page notice with the SEC, withdrawing the rule proposal, on May 21.

It’s good to see FINRA admitting it made a mistake and withdrawing the proposal.

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