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Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Monday, December 28, 2009

FINRA Proposes Change to Arbitration Rules Regarding Hearing Location

The SEC noticed a proposed rule change (SR-FINRA-2009-073) submitted by FINRA related to the hearing location rules of the Codes of Arbitration Procedure for customer and industry disputes. Publication is expected in the Federal Register during the week of December 28. As FINRA explains in the release,

Currently, Rule 12213(a) of the Customer Code states that generally, the Director of FINRA Dispute Resolution (“Director”) will select the hearing location closest to the customer’s residence at the time of the events giving rise to the dispute. FINRA has determined that its policy concerning selection of a hearing location under the Customer Code may be broader than the rule describes.

Under the current rule in the Customer Code, for example, if a customer in an arbitration proceeding lives in Hoboken, New Jersey, the Director will select the New York City hearing location, because this hearing location is closer to the customer’s residence, Hoboken, than FINRA’s Newark, New Jersey hearing location.  There have been instances, however, in which the Director has granted customers’ requests to select a hearing location in their state of residence at the time of the events. ... Thus, in the example above, if the customer requests the Newark, New Jersey hearing location, the Director generally will grant the request, even though the closest hearing location is the New York City location. The Director typically attempts to honor such requests as a convenience to public customers.

FINRA is proposing, therefore, to amend Rule 12213(a) of the Customer Code to add this criterion for selecting a hearing location. The proposed amendment to the rule would state that the Director will select the hearing location closest to the customer’s residence at the time of the events giving rise to the dispute, unless the hearing location closest to the customer’s residence is in a different state. In that case, the customer may request a hearing location in the customer’s state of residence at the time of the events giving rise to the dispute.

.... FINRA believes the proposal is customer-friendly because it gives customers more control over the arbitration process, by providing them with a choice of hearing locations.

http://lawprofessors.typepad.com/securities/2009/12/finra-proposes-change-to-arbitration-rules-regarding-hearing-location.html

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