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FINRA Postpones In-Person Arbitration, Mediation Until April 2

FINRA Postpones In-Person Arbitration, Mediation Until April 2

The agency has continued to push back the resumption of physical arbitration and mediation proceedings because of COVID-19, though hearings can be held via teleconferencing or Zoom.

FINRA is again postponing the resumption of in-person arbitration and mediation proceedings as the COVID-19 pandemic intensifies in many areas around the country. 

The regulatory agency announced on Jan. 5 that in-person hearings are postponed through April 2. This means any proceedings in that time period will not move forward unless both parties agree to using telephone or Zoom, or if the FINRA panel orders that a hearing can proceed remotely. Last month, the agency postponed hearings through the end of February.

“Note that if all parties and arbitrators agree to proceed in-person based on their own assessment of public health conditions, the case may proceed provided that the in-person hearing participants comply with all applicable state and local orders related to the COVID-19 pandemic,” FINRA’s website also states.

The regulatory agency first postponed in-person proceedings last March in light of the spread of the coronavirus throughout the nation. Though FINRA initially pushed the hearings back by only several months, the agency has continued to move the start date back while re-assessing on a monthly basis. 

The postponements and the agency’s reliance on remote proceedings has not gone without some controversy, as there have been several legal challenges alleging that the due process rights of defendants in these hearings are not being met. In one case, attorneys for the Denver-based Alpine Securities argued that a remote disciplinary hearing could hinder the ability to provide effective counsel.

“(The issue) really is the process, the right to present evidence, as well as testimony,” Brent Baker, an attorney with Parsons, Behle & Latimer who is representing Alpine in its suit, told “And until we are able to freely travel, it’s almost impossible to have a full and fair regulatory hearing.”

Sander Ressler, the co-owner and managing director of Essential Edge Compliance Outsourcing Services, said that the vast majority of claimants’ attorneys would prefer in-person hearings, and believed the economic impact of an on-site hearing vs. a remote proceeding could impact the frequency of Zoom hearings post-COVID-19, but only to a point.

“There’s going to be economic considerations, but they’ll be balanced by the fact that every lawyer I’ve spoken with … says its not a conducive environment to being able to present your case in the best light,” he said. “The Zoom hearing is going to have a place in the structure of arbitrations, but I just don’t think it’s going to be prevalent.”

Sharron Ash, the chief litigation counsel at the Hamburger Law Firm, said telephonic hearings had been the norm for FINRA even prior to the pandemic, but she agreed that in-person hearings are favorable to remote proceedings, with superior means to present evidence, assess witness credibility and work with arbitrators.

"In a post-COVID environment, any offering by FINRA to continue remote hearings on the merits should only be with the consent of all parties and based on the technological capabilities of the arbitration panel," she said. "Otherwise, it just begs for additional challenges to the fairness of the forum.”

According to FINRA’s guidelines on restarting in-person hearings, at least six weeks before a hearing is set to start, the agency’s Dispute Resolution Services (DRS) is gauging state and local public health conditions as to whether that hearing can proceed in person. The agency states that in-person hearings can be postponed “if public health conditions at a hearing location deteriorate” or if a participant in the hearing can’t comply with state and local public health mandates. 

The agency noted that postponing a hearing does not necessarily affect case deadlines, though it will waive all postponement fees if the parties involved agree to postpone an in-person hearing that is scheduled before the end of June. While Ressler said the agency had done a good job in adapting to the format of a Zoom hearing, he hoped FINRA would stop postponing in-person hearings by monthly increments.

“Just say that ‘in-person arbitration hearings are postponed until we get back to you,’” he said. “If we knew it was postponed indefinitely, we could make a much more informed decision on whether we want a Zoom hearing or not."

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