Discovery Process

Discovery in securities arbitration cases is very limited. Unlike proceedings in court cases, there are generally no depositions and other methods of discovery available in that venue. Depositions are allowed for very limited purposes set forth in FINRA Rule 12510, such as ill or dying witnesses, extremely large and complex cases or other situations where there are extraordinary circumstances or as the panel deems necessary. Therefore, discovery is typically limited to documentary evidence and parties are to cooperate to their fullest in the exchange of information.

Within sixty days of the date that the statement of answer was to be filed, the parties are required to voluntarily produce certain documents. Each party is notified of the documents that are presumed to be discoverable in all cases between a customer and a member or associated person, pursuant to the FINRA Discovery Guide. The parties are required to produce all documents in their possession described in Document Production Lists 1 and 2 within sixty (60) days of the date the statement of answer was due. If documents cannot be produced within the stated time period, the party must explain why the specific documents are unavailable for production and specify when they will be produced or object as provided in Rule 12508. Whenever any party redacts portions of a document or documents, they must be labeled “redacted.”

Other discovery requests for additional documents or information may be made on a party forty-five (45) days or more after the statement of claim is served. These requests must be reasonable in number and not require narrative answers, since interrogatories are not permitted in arbitration. Response to such other requests for documents and information is due within sixty (60) days from the date the request is received, by producing the documents and information, explaining why the specific documents are unavailable for production and specify when they will be produced or object.

The failure of a party to cooperate fully in the exchange of documents and information as provided by the Code of Arbitration Procedure is taken very seriously by arbitration panels. Under Rule 12511, they have the authority to assess monetary sanctions against a party for discovery abuse. Additionally, they have the power to dismiss a claim, a defense or the entire arbitration proceeding with prejudice.

Subpoenas are normally not necessary for employees or documents of the parties but they are often used to subpoena persons or documents from non-parties. If a party receiving a motion and a subpoena objects to the scope or relevance, they can file written objections within ten (10) days of the receipt of same for a ruling by the chairperson.

Twenty (20) days prior to the beginning of the arbitration evidentiary hearing, each party must exchange a list of all potential witnesses, including their business affiliations, and all documents or other materials to be used in the arbitration that have not been previously produced to the other side. Any documents, materials or witnesses not disclosed may not be used in the hearing, unless the panel determines that good cause existed for not doing so.

Finally, if the parties want a reasoned award in accordance with Rule 12904 they must make this joint request twenty (20) days prior to the beginning of the hearing.

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