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SEC makes call on FINRA arbitration cases

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The Securities and Exchange Commission has approved a new rule that will limit motions to dismiss arbitration before investors present their case. This makes it all the more important to avoid consumer disputes in the first place.

The new rule responds to investor concerns about such motions. “Although arbitrators rarely grant (them), it is costly and time consuming for parties to defend motions to dismiss,” says Linda Fienberg, president, FINRA Dispute Resolution. “This new rule sharply limits the bases for making motions to dismiss and penalizes those who abuse the dismissal process.”

Once FINRA publishes its Regulatory Notice, arbitration panels will be able to grant these motions only for three reasons:

  1. The parties have settled the dispute in writing.
  2. The registered rep’s conduct was factually impossible.
  3. The arbitration claim came more than six years after the disputed event.

The new rule also requires panels to hold a hearing before approving dismissals and to explain their decisions in writing.

If their motion is denied, parties seeking a dismissal will be responsible for fees. Arbitrators can also require them to pay attorney’s costs.


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