New York Securities Fraud Lawyers Blog
FINRA has proposed a change to its Rule 12800, which addresses simplified arbitration involving cases of $50,000 or less. Specifically, the proposal, (Release No. 34-100204; File No. SR-FINRA-2024-008), would amend provision 12800(g)(1), giving customers in paper cases and special proceedings the option to elect whether they want Document Production Lists to apply to all parties. FINRA’s proposed change would increase customer fairness and awareness within simplified arbitration proceedings. If you sustained losses in your brokerage account, you need to speak with a New York Securities Fraud law firm, like Malecki Law, to review your portfolio.
Malecki Law submitted its public comment on the proposal on September 17, 2024, along with ten other people or entities that submitted comments, including professors of law school investor clinics. All relevant public comments are available here, and Malecki Law’s is available here.
FINRA Rule 12800 Currently
Under FINRA Rule 12800(g)(1), Document Production Lists in paper cases or simplified proceeding do not automatically apply:
- Document Production Lists, described in Rule 12506, do not apply to arbitrations subject to this rule. However, the arbitrator may, in his or her discretion, choose to use relevant portions of the Document Production Lists in a manner consistent with the expedited nature of simplified proceedings.
Simplified arbitrations are generally conducted as “paper cases” unless the customer requests one of two hearing options within rule 12800: (1) regular provisions of the code relating to prehearings and hearings under FINRA code 12800(c)(3)(A), or (2) a special proceeding under FINRA Rule 12800(c)(3)(B). In a paper case, the arbitrator makes their decision based solely on the pleadings and other materials submitted by the parties. A special proceeding is an abbreviated hearing by video conference, unless the customer or claimant requests it to be held by telephone or another type of hearing at least 60 days in advance of the first scheduled hearing. If you have begun any of the foregoing processes as a pro se party, but think you need to retain a lawyer, you should reach out to a New York Securities Fraud lawyer, like the lawyers at Malecki Law.
FINRA Rule 12800 Change Proposals
In its proposal, FINRA displays the proposed new language of the rule:
- Applicability of Document Production Lists
- Option One Hearing. The Document Production Lists, described in Rule 12506, apply to arbitrations in which the customer requests an Option One hearing under paragraph (c)(3)(A) of this Rule.
- No Hearing or Option Two Special Proceeding. The Document Production Lists, described in Rule 12506, do[es] not apply to arbitrations in which the customer requests no hearing, pursuant to paragraph (c)(2) of this Rule, or to arbitrations in which the customer requests an Option Two special proceeding, pursuant to paragraph (c)(3)(B) of this Rule, unless the customer requests that the Document Production Lists apply to all parties when initiating an arbitration pursuant to Rule 12302 or, if the customer is a respondent, no later than the answer due date pursuant to Rule 12303, regardless of the parties’ agreement to extend any answer due date. Even if the customer does not timely request that the Document Production Lists apply to all parties, the arbitrator has the discretion to use relevant portions of the Document Production Lists in a manner consistent with the expedited nature of simplified proceedings.
This proposed rule change gives the customer the option, at the time they initiate arbitration, or if they are a respondent, no later than the answer date, to elect whether they want the Document Production Lists to apply to all parties in paper cases and special proceedings, which the current Rule 12800 does not. If incurred substantial losses in your brokerage account, you may have a case in FINRA arbitration to attempt to obtain damages. You should set up a free consultation with a Securities Fraud attorney, like those at Malecki Law in New York, to analytically review your situation.
Malecki Law’s View
Malecki Law further explained in its recent comment letter that it believes the rule change would positively impact customer fairness by helping consumers better understand the discovery process. The change would specifically aid pro se investors, who represent sixty-five percent of customers in paper cases and forty-three percent of customers in special proceedings.
In its comment letter, Malecki Law outlines its interpretation of the rule and why this rule change should be adopted. Malecki Law is advocating on behalf of small investors who likely cannot afford counsel to fight to recoup their funds, and urges the SEC to adopt FINRA’s proposed rule changes. If you want to bring a case in FINRA arbitration, you should consult a Securities Fraud law firm, like Malecki Law in New York, to assess the viability of your claim.
Contributions by Claire Sterin, New York Law School Securities Arbitration Seminar and Field Placement Extern.