Discovery

Overview of Discovery Process

The discovery process allows the parties to obtain facts and information from other parties to the arbitration in order to support their own case and prepare for the hearing.  The Codes of Arbitration Procedure require parties to cooperate with each other to the fullest extent practicable in the voluntary exchange of documents and information to expedite the arbitration process. The Codes contain rules that govern the discovery process, including making discovery requests, responding to such requests, objecting to discovery requests, and arbitrator authority to issue sanctions against parties for discovery abuses.

Customer Code Rules 12505 - 12511
Industry Code Rules 13505 - 13511

The Discovery Guide

For disputes in which an investor is a party, FINRA provides the Discovery Guide, which contain guidelines to help parties and arbitrators during the discovery process. In the 2013 version of the Discovery Guide, FINRA revised the Guide's introduction to provide guidance on resolving electronic discovery disputes relating to the form for producing electronic documents. It explains how product cases are different from other customer cases and describes the types of documents that parties typically request in products cases. Finally, it clarifies the circumstances under which a party may request an affirmation when an opposing party does not produce documents specified in the Guide.

There are three versions of the Discovery Guide available. Please use the version based on when you filed your claim at FINRA.

An article titled “Discovery Abuse in Customer Cases” available in Volume 3 – 2022 of The Neutral Corner is another resource to learn about presumptively discoverable documents and discovery in customer cases, improper objections (e.g., boilerplate and vague objections), conducting meaningful conferral, filing motions to compel, identifying documents withheld from discovery, and producing documents within required timeframes.

Objecting to Discovery Request

Any party may object to a discovery request if it asks the party to provide documentation and information that a party believes is, for example, overly burdensome, not relevant to the case, or involves confidential or privileged information.  Objecting to a discovery request means the party that is the subject of the request argues that the party does not have to provide the documentation or information requested.  The objection must clearly state in writing the request to which the party is objecting and why, and send the written objection to all parties in the case.

Customer Code Rule 12508
Industry Code Rule 13508

Motion to Compel Discovery

If the parties cannot agree on their own how to resolve any discovery dispute, then the party who still wants more documents or information may make a motion to compel the reluctant party to produce the requested documents.  In the motion, the requesting party should explain to the arbitrator(s) why the discovery is relevant and necessary to the case and ask the panel to issue an order compelling production. The arbitrator(s) may schedule a hearing before deciding the motion.

A motion is a request for the arbitrator(s) or Director to direct some act, whether by issuing an order or ruling.  For example, if a party wishes to force a party to produce documents or other information in discovery, the party must make a motion.  A party may make motions in writing or orally during a hearing session.

Customer Code Rules 12503 and 12509
Industry Code Rule 13503 and 13509

Subpoenas

A subpoena is a legal document that compels a person or an entity to show up at the specified date, time and place to testify under oath. It is a useful tool to  gather information that is relevant to the case. A subpoena duces tecum compels a person or an entity to produce the listed documents to the requesting party at a particular time and place.

In a FINRA arbitration, only arbitrators – not attorneys for the parties - may issue a subpoena to non-parties (persons or entities that are not claimants or respondents in the arbitration).  If a party believes that the case requires information from third parties and wants the arbitrators to issue a subpoena, the party must make a written motion for the arbitrators to do so. The arbitrators will then determine whether the subpoena should be issued and how costs will be assessed.

Customer Code Rule 12512
Industry Code Rule 13512

Orders of Production or Appearance without Subpoenas

 If a broker or brokerage firm that is a FINRA member but is not a party to an arbitration case has access to information that a party believes is relevant to the case, the panel may order the production of documents or appearance of witnesses upon a motion of a party without the use of subpoenas. Specifically, the panel may order the appearance of any employee or brokers of a member of FINRA; or the production of any documents in the possession or control of such persons or members.  Generally, the party requesting the appearance of witnesses by, or the production of documents from, non-parties must pay the reasonable costs of the appearance and/or production.

Customer Code Rule 12513
Industry Code Rule 13513

Sanctions

If a party fails to produce documents or information required by a discovery order, the arbitrators may issue sanctions against that party. Sanctions could include assessing fees or penalties, including attorneys' fees; prohibiting a party from admitting evidence; drawing an adverse inference against the party; and even dismissing a claim, defense, or even the entire case. The panel may also initiate a disciplinary referral against a registered broker or brokerage firm that is involved in the proceeding.

Customer Code Rules 12511, 12212
Industry Code Rules 13511, 13212