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FMG Law Blog Line

FINRA Seeks To Simplify Non-Party Discovery

Posted on: April 9th, 2019

By: Greg Fayard

In January 2019, the Financial Industry Regulatory Authority (FINRA) proposed changes to its rules to give non-parties more time to respond to discovery requests and witness orders from arbitration panels. Currently, non-parties only have 10 calendar days from service by U.S. mail to respond or object to document subpoenas or witness/document production orders. Often times, the person responsible for responding to the non-party subpoena or arbitration order receives the subpoena or order after the 10 days have elapsed. When that happens, the non-party has waived its opportunity to object to the subpoena or order, subjecting it to potential sanctions or disciplinary action. To avoid such prejudice to non-parties, FINRA is recommending changes to its rules to give non-parties 15 calendar days (instead of 10) upon receipt (not service) of the order or subpoena. Receipt will include overnight mail, overnight delivery service like FedEx, hand delivery, e-mail or facsimiled documents. Importantly, under the proposed rule changes, service of discovery requests on non-parties by U.S. mail would be excluded. Lastly, FINRA seeks to codify rule changes to reflect how it currently processes and informs arbitration panels regarding non-party objections to subpoenas and orders.

The purpose of FINRA’s proposed rule changes is to provide better due process to non-parties, eliminate the problem of delays with U.S. mail, and to codify FINRA’s current protocols for non-party discovery.

The FINRA rules impacted by the proposed changes are 12512, 12513, 13512 and 13513. The new rules have to be approved by the Securities and Exchange Commission. If approved, FINRA will announce an effective date of the rule changes in a future regulatory notice.

If you have any questions or would like more information, please contact Greg Fayard at [email protected].

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