[Federal Register Volume 89, Number 212 (Friday, November 1, 2024)]
[Notices]
[Pages 87435-87439]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25425]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101449; File No. SR-FINRA-2024-008]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving a Proposed Rule Change, as Modified by 
Partial Amendment No. 1, To Amend FINRA Rule 12800 (Simplified 
Arbitration) To Clarify and Amend the Applicability of the Document 
Production Lists

October 28, 2024.

I. Introduction

    On May 13, 2024, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change (SR-FINRA-2024-008) to amend 
FINRA Rule 12800 (Simplified Arbitration) of the FINRA Code of 
Arbitration Procedure for Customer Disputes (``Customer Code''). The 
proposed rule change, as subsequently modified by a partial amendment 
(``Partial Amendment No. 1''), would address the applicability of the 
lists of documents that are presumed to be discoverable in regular 
arbitrations between a customer and a member or associated person 
(``Document Production Lists'') \3\ to simplified customer arbitrations 
administered under FINRA Rule 12800.\4\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ FINRA Rule 12506 (Document Production Lists) describes the 
documents that are presumed to be discoverable in all arbitrations 
between a customer and a member firm or associated person.
    \4\ Simplified customer arbitrations are arbitrations in which 
the dispute between a customer and member firm or associated person 
involves $50,000 or less, exclusive of interest and expenses. See 
FINRA Rule 12800(a).
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    The proposed rule change was published for public comment in the 
Federal Register on May 28, 2024.\5\ The public comment period closed 
on June 18, 2024. The Commission received comment letters related to 
this filing.\6\ On July 8, 2024, FINRA consented to an extension of the 
time period in which the Commission must approve the proposed rule 
change, disapprove the proposed rule change, or institute proceedings 
to determine whether to

[[Page 87436]]

approve or disapprove the proposed rule change to August 26, 2024.\7\ 
On August 7, 2024, FINRA responded to the comment letters received in 
response to the Notice and filed Partial Amendment No. 1 to modify the 
proposed rule change.\8\
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    \5\ See Exchange Act Release No. 100204 (May 21, 2024), 89 FR 
46210 (May 28, 2024) (File No. SR-FINRA2024-008) (``Notice'').
    \6\ The comment letters are available at https://www.sec.gov/comments/sr-finra-2024-008/srfinra2024008.htm.
    \7\ See letter from Carissa Laughlin, Principal Counsel, Office 
of General Counsel, FINRA, to Lourdes Gonzalez, Assistant Chief 
Counsel, Division of Trading and Markets, Commission, dated July 8, 
2024, https://www.finra.org/sites/default/files/2024-07/SR-FINRA-2024-008-extension1.pdf.
    \8\ See letter from Carissa Laughlin, Principal Counsel, Office 
of General Counsel, FINRA, to Vanessa Countryman, Secretary, 
Commission, dated August 7, 2024, https://www.sec.gov/comments/sr-finra-2024-008/srfinra2024008-503775-1470022.pdf (``FINRA Response 
Letter''); see also Partial Amendment No. 1, https://www.finra.org/sites/default/files/2024-08/SR-FINRA-2024-008-Partial-A-1.pdf.
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    On August 27, 2024, the Commission published a notice of filing of 
Partial Amendment No. 1 and an order instituting proceedings to 
determine whether to approve or disapprove the proposed rule change, as 
modified by Partial Amendment No. 1.\9\ The Commission received 
additional comment letters in response to the OIP.\10\ This order 
approves the proposed rule change, as modified by Partial Amendment No. 
1 (hereinafter referred to as the ``proposed rule change'' unless 
otherwise specified).
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    \9\ See Exchange Act Release No. 34-100787 (Aug. 21, 2024), 89 
FR 68686, (Aug. 27, 2024), File No. SR-FINRA-2024-008 (``OIP'').
    \10\ The comment letters received in response to the OIP are 
available at https://www.sec.gov/comments/sr-finra-2024-008/srfinra2024008.htm.
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II. Description of the Proposed Rule Change

A. Background

    FINRA Dispute Resolution Services (``DRS'') provides a Discovery 
Guide \11\ to help guide the parties and arbitrators through the 
discovery process in customer arbitrations.\12\ The Document Production 
Lists, which are included in the Discovery Guide, outline presumptively 
discoverable documents that the parties should exchange, without 
arbitrator or DRS staff intervention.\13\
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    \11\ https://www.finra.org/sites/default/files/ArbMed/p394527.pdf.
    \12\ See Notice at 46210. In addition to describing the Document 
Production Lists, the Discovery Guide includes information about the 
circumstances under which the parties may object to the production 
of documents on the Document Production Lists, the parties' ability 
to request additional documents other than those included on the 
Document Production Lists, the process for obtaining the production 
of documents from non-parties, the forms that the production of 
documents should take, and the parties' right to object to the 
production of documents based on confidentiality and privilege 
concerns. See Notice at 46211. The FINRA Discovery Guide and 
Document Production Lists do not apply to arbitrations administered 
under the Code of Arbitration Procedure for Industry Disputes. See 
Notice at 46210 n.3.
    \13\ See Notice at 46210; see also FINRA Rule 12506.
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    Document Production Lists 1 and 2 describe the documents that are 
presumed to be discoverable in all arbitrations between a customer and 
a member firm or associated person, except in simplified customer 
arbitrations as explained below.\14\ List 1 outlines the documents that 
member firms and associated persons shall produce; List 2 outlines the 
documents that customers shall produce.\15\ The proposed rule change 
would affect the applicability of the Document Production Lists in 
simplified customer arbitrations.
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    \14\ Id.; see also FINRA Rule 12506(a).
    \15\ See Notice at 46210; see also https://www.finra.org/sites/default/files/ArbMed/p394527.pdf.
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    There are three types of simplified customer arbitrations. If the 
customer does not request a hearing, the arbitrator will render an 
award based on the pleadings and other materials submitted by the 
parties (``paper cases'').\16\ If the customer requests a hearing, the 
customer must select between one of two hearing options, known as an 
Option One hearing and an Option Two hearing.\17\ If the customer 
requests an Option One hearing, the regular provisions of the Customer 
Code relating to prehearings and hearings apply (``regular hearing''), 
including the Document Production Lists.\18\ Alternatively, the 
customer may request an Option Two special proceeding, which is an 
abbreviated hearing (``special proceeding'').\19\
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    \16\ See Notice at 46210; see also FINRA Rule 12800(c)(2).
    \17\ See Notice at 46210; see also FINRA Rule 12800(c)(3).
    \18\ See Notice at 46210; see also FINRA Rule 12800(c)(3)(A); 
see also FINRA DRS Party's Reference Guide, p. 31, https://www.finra.org/sites/default/files/Partys-Reference-Guide.pdf 
(explaining that ``[t]he Document Production Lists in the Discovery 
Guide as described in FINRA Rule 12506 do not apply to simplified 
[customer] arbitrations decided on the papers or decided by special 
proceeding. However, the Discovery Guide does apply to simplified 
cases in which a customer requests a regular hearing.''); see also 
https://www.finra.org/arbitration-mediation/simplified-arbitrations. 
See Notice at 46210 n.11 and accompanying text; see also infra note 
24.
    \19\ See Notice at 46210; see also FINRA Rule 12800(c)(3)(B).
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    Currently, the Document Production Lists do not apply in paper 
cases and special proceedings.\20\ Accordingly, the parties in such 
proceedings must request documents and other information from each 
other, pursuant to FINRA Rule 12800(g)(2). However, an arbitrator may 
exercise discretion to use relevant portions of the Document Production 
Lists in paper cases and special proceedings ``in a manner consistent 
with the expedited nature of simplified proceedings.'' \21\ Absent such 
an exercise of discretion by the arbitrator, in order to obtain 
discovery in these proceedings, the parties must request documents and 
other information from each other without the benefit of the Document 
Production Lists.\22\ As a result, no documents or information are 
presumptively discoverable in paper cases and special proceedings, but 
they are presumptively discoverable in simplified customer arbitrations 
in which the customer requests a regular hearing as noted above.\23\
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    \20\ See Notice at 46210. FINRA Rule 12800(g)(1) provides that 
the Document Production Lists ``do not apply to arbitrations subject 
to this rule'' (i.e., paper cases and special proceedings). Notice 
at 46210.
    \21\ Notice at 46210; see FINRA Rule 12800(g)(1).
    \22\ See Notice at 46210; see also FINRA Rule 12800(g)(2) 
(providing that all production requests must be served on all other 
parties and filed with the Director within 30 days from the date 
that the last answer is due; any response or objection to a 
production request must be served on all other parties and filed 
with the Director within 10 days of the receipt of the request).
    \23\ See Notice at 46210.
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B. Proposed Rule Change

    The proposed rule change would amend FINRA Rule 12800(g)(1) to give 
customers in paper cases and special proceedings the option to elect 
whether they want the Document Production Lists to apply to all 
parties.\24\
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    \24\ See id. at 46211. The proposed rule change also would make 
technical changes to Rule 12800. Currently, FINRA Rule 
12800(c)(3)(A) states that, when a customer requests a regular 
hearing, the ``regular provisions'' of the Customer Code relating to 
prehearings and hearings apply. As noted above, DRS has issued 
guidance clarifying this language to mean that the Document 
Production Lists apply in simplified customer arbitrations in which 
the customer requests a regular hearing. See Notice at 46212; see 
also supra note 18. The proposed rule change would codify this 
guidance. See Notice at 46212. Specifically, proposed Rule 
12800(g)(1)(A) would provide that ``[t]he Document Production Lists, 
described in Rule 12506, apply to arbitrations in which the customer 
requests an Option One hearing.''
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    Proposed Rule 12800(g)(1)(B) states that the Document Production 
Lists described in FINRA Rule 12506 would not apply in paper cases or 
special proceedings unless: (1) the customer requests that they apply 
at the time he or she initiates an arbitration pursuant to Rule 12302 
(Filing and Serving an Initial Statement of Claim) or, (2) if the 
customer is a respondent, he or she requests that they apply no later 
than the answer due date pursuant to Rule 12303 (Answering the 
Statement of Claim), regardless of the parties'

[[Page 87437]]

agreement to extend any answer due date.\25\
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    \25\ Id. FINRA Rule 12303 provides that ``respondent(s) must 
serve each other party with an answer to the statement of claim 
within 45 days of receipt of the statement of claim. FINRA Rule 
12207(a) provides that the parties may agree in writing to extend or 
modify the deadline for serving an answer.'' See Notice at 46211 
n.13.
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    If the customer does not timely elect to apply the Document 
Production Lists to all parties as provided, proposed Rule 
12800(g)(1)(B) would continue to permit an arbitrator to exercise 
discretion to use relevant portions of the Document Production Lists in 
a manner consistent with the expedited nature of simplified customer 
arbitrations. Additionally, proposed Rule 12800(g)(2) would continue to 
permit the parties to request documents and information from each 
other.\26\
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    \26\ Nothing in the Discovery Guide precludes the parties from 
voluntarily agreeing to an exchange of documents in a manner 
different from that set forth in the Discovery Guide. FINRA stated 
that it encourages parties to agree to the voluntary exchange of 
documents and to stipulate to various matters. See Notice at 46211 
n.19; see also https://www.finra.org/sites/default/files/ArbMed/p394527.pdf.
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III. Discussion of Commission Findings

    After careful review of the proposed rule change, the comment 
letters, and FINRA's response to the comments, the Commission finds 
that the proposed rule change is consistent with the requirements of 
the Exchange Act and the rules and regulations thereunder that are 
applicable to a national securities association.\27\ Specifically, as 
explained in more detail below, the Commission finds that the proposed 
rule change is consistent with Section 15A(b)(6) of the Exchange Act, 
which requires, among other things, that FINRA rules be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, and, in general, to protect 
investors and the public interest.\28\ The Commission addresses the 
proposed rule change's specific provisions, and any related comments, 
in turn.
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    \27\ In approving this rule change, the Commission has 
considered the rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \28\ 15 U.S.C. 78o-3(b)(6).
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    Currently, the Document Production Lists do not apply in paper 
cases or in special proceedings. Accordingly, the parties in such 
proceedings must request documents and other information from each 
other, pursuant to FINRA Rule 12800(g)(2).\29\ The proposed rule change 
would amend FINRA Rule 12800(g)(1) to give customers in paper cases and 
special proceedings the option to elect at the time that they initiate 
an arbitration or, if they are a respondent, no later than the answer 
due date, whether they want the Document Production Lists to apply to 
all parties.\30\ If such an election is made, all parties would be 
required to produce the documents on the Document Production Lists, 
explain why the documents cannot be produced, or object to the 
production of the documents within the timeframes set forth in FINRA 
Rule 12506.\31\
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    \29\ See supra note 22.
    \30\ A commenter suggested a technical amendment to proposed 
Rule 12800(g)(1)(B) to make clear that the Document Production Lists 
are found in Rule 12506 so that a pro se investor is not confused 
about the applicability of the Document Production Lists when 
pursuing a paper case or special proceeding. See letter from Nikki 
Junda, Student Intern, Elissa Germaine, Supervising Attorney, and 
Christine Lazaro, Supervising Attorney, Securities Arbitration 
Clinic of St. John's University School of Law, dated June 17, 2024, 
https://www.sec.gov/comments/sr-finra-2024-008/srfinra2024008-477251-1366154.html (``St. John's Letter I'') at 2. FINRA agreed by 
filing Partial Amendment No. 1 to modify proposed Rule 
12800(g)(1)(B) to mirror the language in proposed Rule 
12800(g)(1)(A) such that both provisions begin with ``The Document 
Production Lists, described in Rule 12506 . . .''. See Partial 
Amendment No. 1 and FINRA Response Letter at 2-3.
    \31\ See FINRA Rule 12506(b)(1).
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    Commenters supported the proposed rule change.\32\ For example, 
commenters stated that applying the Document Production Lists to paper 
cases and special proceedings would generally protect investors,\33\ 
enhance the fairness of the proceedings and arbitration process,\34\ 
balance the need for efficiency and fairness,\35\ and enhance fairness 
without unduly raising costs.\36\ In addition, multiple commenters 
stated that the proposed changes would enhance pro se customers' 
awareness and understanding of the discovery process and support them 
in seeking material evidence necessary to their claims.\37\ Some 
commenters also suggested additional changes.
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    \32\ See letter from Elissa Germaine, Supervising Attorney, and 
Christine Lazaro, Supervising Attorney, Securities Arbitration 
Clinic of St. John's University School of Law, dated September 17, 
2024, https://www.sec.gov/comments/sr-finra-2024-008/srfinra2024008-521575-1498402.pdf (``St. John's Letter II''); letter from Jenice 
Malecki, Jacqueline Candella, Adam G. Schreck, and Claire Sterin, 
Intern, Malecki Law, dated September 17, 2024, https://www.sec.gov/comments/sr-finra-2024-008/srfinra2024008-521595-1498462.pdf 
(``Malecki Letter''); letter from Joseph C. Peiffer, President, 
Public Investor Advocate Bar Association, dated September 17, 2024, 
https://www.sec.gov/comments/sr-finra-2024-008/srfinra2024008-521555-1498322.pdf (``PIABA Letter II''); letter from William A. 
Jacobson, Clinical Professor of Law, Director of the Cornell 
Securities Law Clinic, Noah Moreano, Cornell Law Student, Cornell 
Securities Law Clinic, Cornell Law School, dated September 16, 2024, 
https://www.sec.gov/comments/sr-finra-2024-008/srfinra2024008-520935-1497242.pdf (``Cornell Letter''); letter from Nicole G. 
Iannarone, Associate Professor of Law, Drexel University School of 
Law, dated June 18, 2024, https://www.sec.gov/comments/sr-finra-2024-008/srfinra2024008-483631-1383094.pdf (``Iannarone Letter''); 
letter from Clare M. Farrelly, MBA, Student Intern, Fairbridge 
Investor Rights Clinic, Elisabeth Haub School of Law, Pace 
University, dated June 18, 2024, https://www.sec.gov/comments/sr-finra-2024-008/srfinra2024008-483651-1383114.pdf (``Pace Letter''); 
letter from Jill I. Gross, Vice Dean for Academic Affairs and 
Professor of Law, Elisabeth Haub School of Law, Pace University, 
dated June 18, 2024, https://www.sec.gov/comments/sr-finra-2024-008/srfinra2024008-1382774.htm (``Gross Letter''); letter from Scott 
Eichhorn, Director, and Melanie S. Cherdack, Associate Director, 
Investor Rights Clinic, University of Miami School of Law, dated 
June 18, 2024, https://www.sec.gov/comments/sr-finra-2024-008/srfinra2024008-483571-1382814.pdf (``Miami Letter''); letter from 
Joseph C. Peiffer, President, Public Investor Advocate Bar 
Association, dated June 18, 2024, https://www.sec.gov/comments/sr-finra-2024-008/srfinra2024008-483331-1382594.pdf (``PIABA Letter 
I''); St. John's Letter I; and letter from Steven B. Caruso, dated 
May 24, 2024, https://www.sec.gov/comments/sr-finra-2024-008/srfinra2024008-477251-1366154.html (``Caruso Letter'').
    \33\ See PIABA Letter I at 1.
    \34\ See Gross Letter at 1.
    \35\ See Pace Letter at 1.
    \36\ Id. at 2.
    \37\ See Caruso Letter at 1; PIABA Letter I at 1-2; Pace Letter 
at 3; St. John's Letter I at 1-2; Cornell Letter at 2, St. John's 
Letter II at 1; and Malecki Letter at 2-3.
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    One commenter suggested changes to proposed Rule 12800(g)(1)(B) to 
give a customer who is a respondent more time to request application of 
the Document Productions Lists. As proposed, if the customer is a 
respondent, he or she must request that the Document Production Lists 
apply no later than the date he or she must answer a statement of claim 
pursuant to Rule 12303, regardless of the parties' agreement to extend 
any answer due date. The commenter suggested that when a customer 
respondent obtains an extension of time to answer, the customer should 
be allowed to opt in to the Document Production Lists when the customer 
files the answer pursuant to an agreed deadline extension, rather than 
on the original due date for the answer.\38\
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    \38\ See Pace Letter at 3-4.
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    In response, FINRA stated that the proposed rule change ``balances 
the expedited nature of simplified customer arbitrations and the 
ability of customer respondents to make an informed decision regarding 
whether to use the Document Production Lists.'' \39\ For example, if a 
customer could request that the Document Production Lists apply when 
the customer respondent files the answer and the answer is not filed 
until just before the special proceeding hearing date, then ``this 
would require the arbitrator and parties to reschedule the hearing date 
to a date

[[Page 87438]]

at least two months later than originally scheduled to allow parties 
adequate time to respond to the Document Production Lists.'' \40\ 
Similarly, allowing customer respondents to request that the Document 
Production Lists apply when filing the answer in a papers case rather 
than by the answer due date could significantly delay the conclusion of 
such cases, which are generally the most expedited form of arbitration 
case.\41\ Furthermore, FINRA stated that to the extent a customer 
respondent does not timely elect to apply the Document Production Lists 
to all parties, proposed Rule 12800(g)(1)(B) continues to allow the 
arbitrator discretion to use relevant portions of the Document 
Production Lists in a manner consistent with the expedited nature of 
simplified customer arbitrations.\42\ In addition, the parties can 
still request documents and information from each other pursuant to 
FINRA Rule 12800(g)(2).\43\ For these reasons, FINRA did not accept the 
suggested change.
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    \39\ FINRA Response Letter at 3.
    \40\ Id. at 3-4.
    \41\ See FINRA Response Letter at 4.
    \42\ Id.; see also Notice at 46211.
    \43\ See FINRA Response Letter at 4; see also Notice at 46211.
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    Another commenter suggested that FINRA add a hyperlink or cross 
reference to the Discovery Guide within the rules whenever the Document 
Production Lists are mentioned to help investors locate and use FINRA 
guidance.\44\ This commenter also suggested that FINRA make guidance on 
its website easier to locate for parties in simplified 
arbitrations.\45\ Another commenter recommended that FINRA provide 
parties a ``plain language explanation of the discovery process and how 
it will differ with use of the Discovery Guide.'' \46\
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    \44\ See St. John's Letter I at 2.
    \45\ Id.
    \46\ Miami Letter at 3.
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    In response to the commenters' suggestions, FINRA: (1) updated the 
``Related Links'' section of the web pages for FINRA Rules 12506, 
12507, 12508, and 12800 to include a hyperlink to the Discovery Guide 
web page; \47\ (2) updated the FINRA Rule 12800 web page by adding 
hyperlinks to any cross-referenced FINRA Rules; \48\ and (3) updated 
its ``Overview of Arbitration & Mediation'' web page by adding a 
hyperlink to cross-reference its ``Simplified Arbitrations'' web 
page.\49\ In addition, FINRA stated that it would develop and publish 
guidance about discovery that will be available to all parties in 
simplified arbitration and would, among other things, direct parties to 
the Discovery Guide.\50\
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    \47\ See FINRA Response Letter at 5-6.
    \48\ Id. at 6.
    \49\ See FINRA Response Letter at 5.
    \50\ Id.; see also Notice at 46211.
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    Finally, one commenter recommended providing and requiring more 
arbitrator training, including providing arbitrators greater discretion 
to award sanctions for discovery violations.\51\ Specifically, this 
commenter stated that enhanced training should provide arbitrators with 
sufficient detail on: (1) the requirements of parties when asserting 
objections; (2) the adequate bases for objections to overcome the 
presumption of discoverability; (3) how objections may lead to the risk 
that arbitrators do not have relevant documents and information to 
decide the case; and (4) the circumstances under which an arbitrator 
may award sanctions against parties who assert boilerplate 
objection.\52\
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    \51\ See Miami Letter at 3-4.
    \52\ Id.
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    In response, FINRA stated that it currently provides mandatory 
training and various other resources to arbitrators regarding the 
discovery process.\53\ For example, arbitrators must pass FINRA's Basic 
Arbitrator Training Program in order to serve on FINRA arbitration 
cases.\54\ The Basic Arbitrator Training Program includes a module 
dedicated to the discovery process.\55\ FINRA stated that this module 
also reminds arbitrators that pro se parties ``may need more procedural 
direction and specific deadlines for discovery requests and 
responses.'' \56\ Moreover, in order to qualify as a chairperson, 
arbitrators must complete training containing three modules with 
information about the discovery process and issues, including motions 
to compel discovery.\57\ In addition, DRS also offers voluntary, 
subject-specific training modules, including an online course titled 
``Discovery, Abuses and Sanctions'' that focuses on the respective 
duties of arbitrators and parties in the discovery process.\58\ 
Further, FINRA stated that it also provides updates and reminders to 
arbitrators regarding discovery procedures via its Neutral Workshops 
and a quarterly newsletter,\59\ as well as the DRS Arbitrator's Guide, 
which dedicates two sections to discovery and motions.\60\ FINRA stated 
that in light of these available resources, it ``does not anticipate 
providing additional arbitrator training on the discovery process at 
this time.'' \61\
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    \53\ See FINRA Response Letter at 6.
    \54\ Id. (citing Arbitrator Training, https://www.finra.org/arbitration-mediation/rules-case-resources/arbitrator-training 
(discussing how an arbitrator candidate must complete the 
comprehensive Basic Arbitrator Training Program to become eligible 
to serve on arbitration cases)).
    \55\ Id. (citing FINRA DRS Basic Arbitrator Training Program 
Transcript, p. 21, https://www.finra.org/sites/default/files/2024-05/FINRA-Basic-Arbitrator-and-Expungement-Training-Full-Course-Transcript.pdf). The training includes, among other things: (1) 
understanding the discovery process and timelines; (2) ruling on 
discovery requests based on the papers; and (3) imposing discovery 
sanctions when a party fails to provide sufficient information or 
documents. See id.
    \56\ Id. at 6.
    \57\ See id. (citing FINRA DRS Chairperson Training Transcript, 
pp. 4-6, 9-15, 17-21, https://www.finra.org/sites/default/files/2024-05/FINRA_Chair-Training-Full-Transcript.pdf).
    \58\ See id. at 6-7 (citing Arbitrator Training, https://www.finra.org/arbitration-mediation/rules-case-resources/arbitrator-training (discussing the Discovery, Abuses and Sanctions advanced 
training course for arbitrators)). FINRA stated that this course: 
(1) explains the Discovery Guide; (2) discusses the need for orders 
of confidentiality; (3) helps arbitrators recognize and address 
discovery abuses; and (4) reviews possible sanctions if they become 
necessary. See id. at 7.
    \59\ See id. at 7.
    \60\ See id. at 7-8 (citing FINRA DRS Arbitrator's Guide, 
https://www.finra.org/sites/default/files/arbitrators-ref-guide.pdf).
    \61\ FINRA Response Letter at 8.
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    Giving customers in paper cases and special proceedings the option 
to elect whether they want the Document Production Lists to apply to 
all parties at the time that they initiate an arbitration or, if they 
are a respondent, no later than the answer due date, should increase 
the efficiency of simplified arbitration proceedings while maintaining 
their expedited nature. By opting to use the Document Production Lists, 
parties should receive those documents and information that are 
relevant to the dispute without the need to make production requests or 
engage in motion practice, which should help expedite the discovery 
process. Furthermore, increased access to relevant documents and other 
information should result in outcomes (i.e., awards and settlements) in 
paper cases or special proceedings that are more consistent with the 
merits of the case.
    In addition, the proposed rule change should help facilitate the 
discovery process in arbitration cases. Because many of the customers 
who appear in simplified arbitration cases are pro se, they are more 
likely than customers in regular arbitration cases to lack familiarity 
with the discovery process. Giving customers in paper cases and special 
proceedings the option to elect whether they want the Document 
Production Lists to apply to all parties is, therefore, a reasonable 
approach to facilitating the discovery process for customers. FINRA 
also reasonably determined to decline giving customer respondents more 
time to request

[[Page 87439]]

application of the Document Productions Lists. By requiring that a 
customer respondent request that the Document Production Lists apply no 
later than the answer due date pursuant to Rule 12303, rather than any 
extended answer due date agreed to by the parties, the proposed rule 
change reasonably balances providing respondent customers with time to 
determine whether to apply the Document Production Lists with the 
expeditious nature of simplified proceedings.
    Further, in addition to the proposed rule change, FINRA has taken, 
and has stated that it will continue to take, measures that should 
further enhance awareness and transparency of the discovery process, as 
well as help customers evaluate whether to request application of the 
Document Production Lists. Specifically, FINRA updated its website to 
provide more direct access to FINRA guidance and rules related to 
simplified arbitration and the discovery process, including the 
Document Production Lists. In addition, FINRA stated that it will 
publish guidance about discovery that would assist customers in making 
informed decisions regarding whether to elect to use the Document 
Production Lists in their case. Moreover, the educational resources 
currently available to arbitrators should help ensure that arbitrators 
are well trained on the discovery process, including use of the 
Discovery Production Lists, so that they can foster simplified 
arbitration proceedings that are less susceptible to unsupported 
procedural objections regarding document production and that operate in 
a fair and expeditious manner. For these reasons, the proposed rule 
change is reasonably designed to protect investors and the public 
interest.

IV. Conclusion

    The proposed rule change would provide customers in paper cases and 
special proceedings the option to elect whether they want the Document 
Production Lists to apply to all parties. In this way, the proposed 
rule change would facilitate discovery of the documents and information 
that are relevant to a customer's arbitration, and thereby enhance the 
arbitration process. The proposed rule change would also codify 
existing guidance stating that the Document Production Lists are 
applicable in simplified customer arbitrations in which the customer 
requests a regular hearing. Codifying this guidance would enhance 
parties' awareness and understanding of the discovery process in 
certain simplified customer arbitrations.
    For the reasons set forth above, the Commission finds that the 
proposed rule change, as modified by Partial Amendment No. 1, is 
consistent with Section 15A(b)(6) of the Exchange Act, which requires, 
among other things, that FINRA rules be designed to prevent fraudulent 
and manipulative acts and practices, promote just and equitable 
principles of trade, and, in general, protect investors and the public 
interest.\62\
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    \62\ 15 U.S.C. 78o-3(b)(6).
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    It is therefore ordered pursuant to Section 19(b)(2) of the 
Exchange Act \63\ that the proposed rule change (SR-FINRA-2024-008), as 
modified by Partial Amendment No. 1, be, and hereby is, approved.
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    \63\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\64\
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    \64\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-25425 Filed 10-31-24; 8:45 am]
BILLING CODE 8011-01-P