Thursday, January 8, 2009

SEC Approves FINRA Ban on Motions to Dismiss

Brokers and brokerage firms have lost additional rights today, as FINRA announced that the SEC has approved FINRA's rule change which will virtually ban all motions to dismiss in FINRA arbitrations.

No matter what your legal defense, unless it is eligibility or factual impossibility, you cannot make a motion to dismiss, and you must go to a hearing.

This a shame, Without any evidence of abuse, other than convenient antedotes, FINRA proposed this rule, which materially alters the playing field in arbitration. Now every respondent must defend himself in any arbitration where any claimant cares to name him.

It is amazing how much the industry will put up with. This rule change is going to codify the practice that FINRA has condoned for years - we do not grant motions to dismiss. The claimant gets to decide who is forced to spend money to defend themselves, and once a defendant decides to name a respondent in a case, he is financially committed to defend himself through the discovery process and a hearing regardless of the merit of his legal defenses.

Just wait - next up, a claimant's lawyer will name John Thain in the next Merrill suit, along with every other control person at Merrill. They cannot move to dismiss, they will be forced to participate in discovery.

It is truly a shame. First FINRA ignored the law of venue and jurisdiction, then they decided that they did not have to abide by the decisions of their own arbitrators, then they removed the statutory right of attorneys to issue subpoenas, and now they are guaranteeing that hundreds of thousands of dollars will unnecessarily be spent defending meritless claims.

And outsiders say that FINRA is in Wall Street's pocket? Only one who is completely uninformed could reach that opinion.


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