Notice2025-04329
Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend the Codes of Arbitration Procedure To Adopt FINRA Rules 12808 and 13808 (Accelerated Processing) To Accelerate the Processing of Arbitration Proceedings for Parties Who Qualify Based on Their Age or Health Condition
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 18, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 51 (Tuesday, March 18, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 51 (Tuesday, March 18, 2025)]
[Notices]
[Pages 12616-12619]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-04329]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102641; File No. SR-FINRA-2024-021]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Instituting Proceedings To Determine Whether To
Approve or Disapprove a Proposed Rule Change To Amend the Codes of
Arbitration Procedure To Adopt FINRA Rules 12808 and 13808 (Accelerated
Processing) To Accelerate the Processing of Arbitration Proceedings for
Parties Who Qualify Based on Their Age or Health Condition
March 12, 2025.
I. Introduction
On December 11, 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 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change (SR-FINRA-2024-021) to amend the
Code of Arbitration Procedure for Customer Disputes (``Customer Code'')
and the Code of Arbitration Procedure for Industry Disputes (``Industry
Code'') (together, ``Codes'') to add new FINRA Rules 12808 and 13808
(Accelerated Processing). As stated in the Notice, the proposed rule
change would accelerate the processing of arbitration proceedings for
parties who qualify based on their age or health condition.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Exchange Act Release No. 101957 (Dec. 18, 2024), 89 FR
105128 (Dec. 26, 2024) (File No. SR-FINRA-2024-021) (``Notice''),
<a href="https://www.govinfo.gov/content/pkg/FR-2024-12-26/pdf/2024-30680.pdf">https://www.govinfo.gov/content/pkg/FR-2024-12-26/pdf/2024-30680.pdf</a>.
---------------------------------------------------------------------------
The proposed rule change was published for public comment in the
Federal Register on December 26, 2024.\4\ The public comment period
closed on January 16, 2025. The Commission received comment letters in
response to the Notice.\5\ On January 21, 2025, 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 approve or disapprove the proposed
rule change to March 26, 2025.\6\ On March 12, 2025, FINRA responded to
the comment letters received in response to the Notice.\7\
---------------------------------------------------------------------------
\4\ Id.
\5\ The comment letters are available at <a href="https://www.sec.gov/comments/sr-finra-2024-021/srfinra2024021.htm">https://www.sec.gov/comments/sr-finra-2024-021/srfinra2024021.htm</a>.
\6\ See letter from Kristine Vo, Assistant General Counsel,
Office of General Counsel, FINRA, dated January 21, 2025, <a href="https://www.finra.org/sites/default/files/2025-01/FINRA-2024-021-Extension1.pdf">https://www.finra.org/sites/default/files/2025-01/FINRA-2024-021-Extension1.pdf</a>.
\7\ See letter from Kristine Vo, Assistant General Counsel,
Office of General Counsel, FINRA, dated March 12, 2025, <a href="https://www.sec.gov/comments/sr-finra-2024-021/srfinra2024021.htm">https://www.sec.gov/comments/sr-finra-2024-021/srfinra2024021.htm</a>.
---------------------------------------------------------------------------
The Commission is publishing this order pursuant to Section
19(b)(2)(B) of the Exchange Act \8\ to institute proceedings to
determine whether to approve or disapprove the proposed rule change.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
A. Background
FINRA's Dispute Resolution Services (``DRS'') provides an
arbitration forum for disputes between customers, member firms, and
associated persons of member firms.\9\ FINRA stated that it currently
offers a program to expedite arbitration proceedings in its DRS forum
for parties who have a serious health condition or are at least 65
years old (``the current program''). FINRA further stated that when an
eligible party makes a request to expedite the proceedings under the
current program, ``DRS staff will expedite the case-related tasks that
they can control, such as completing the arbitrator selection process,
scheduling the initial prehearing conference, and serving the final
award.'' \10\ However, the current program does not provide for
shortened, rule-based deadlines for parties or provide arbitrators with
direction on how quickly the arbitration should be completed. As a
result, FINRA stated that cases that qualify for the current program
``close only marginally more quickly than cases that are not in the
current program.'' \11\
---------------------------------------------------------------------------
\9\ See FINRA Rules 12101(a) (Applicability of [Customer] Code),
13101(a) (Applicability of [Industry] Code). FINRA also provides a
mediation forum that is not the subject of this proposed rule
change. See FINRA Rule 14101 (Applicability of [Mediation] Code).
\10\ See Notice at 105128.
\11\ See Notice at 105128.
---------------------------------------------------------------------------
Accordingly, FINRA's proposed rule change would establish rules for
accelerated case processing by codifying shortened case-processing
deadlines for eligible parties and providing direction to arbitrators
regarding how quickly a proceeding should be completed.\12\ The
proposed rule change would also establish eligibility requirements,
based on a party's age or eligible health condition, for parties to
request accelerated processing. FINRA stated that by accelerating case
processing, the proposed rule change would shorten the length of
proceedings subject to the proposed rule change by approximately six
months, which would make a meaningful difference for older parties or
those suffering from a serious health condition.\13\
---------------------------------------------------------------------------
\12\ Id.
\13\ Id.
---------------------------------------------------------------------------
B. Proposed Rule Change
1. Requesting Accelerated Case Processing
FINRA's proposed rule change would allow parties to request
accelerated processing of a case when initiating an arbitration
pursuant to FINRA Rules 12302 and 13302 or filing an answer pursuant to
FINRA Rules 12303 and 13303 if they meet one of two eligibility
requirements based on their age or health condition.\14\ The proposed
rule change would also continue to allow parties who do not meet the
two eligibility requirements to request that the panel consider other
factors, including their age and health, when scheduling hearings and
discovery, briefing, and motion deadlines.\15\
---------------------------------------------------------------------------
\14\ Proposed Rules 12808(a) and 13808(a).
\15\ See Notice at 105128-105129; Proposed Rules 12808(a)(3) and
13808(a)(3).
---------------------------------------------------------------------------
[[Page 12617]]
a. Eligibility Based on Age
Proposed Rules 12808(a)(1)(A) and 13808(a)(1)(A) would allow a
party to request accelerated processing of a case when initiating an
arbitration or filing an answer if the requesting party is at least 70
years of age at the time of the request.\16\
---------------------------------------------------------------------------
\16\ See Notice at 105129.
---------------------------------------------------------------------------
b. Eligibility Based on Health
Proposed Rules 12808(a)(1)(B) and 13808(a)(1)(B) would allow a
party to request accelerated processing of a case when initiating an
arbitration or filing an answer if the party making the request
certifies, in the manner and form required by the DRS Director, that:
(i) the party has received a medical diagnosis and prognosis, and (ii)
based on that medical diagnosis and prognosis, the party has a
reasonable belief that accelerated processing of the case is necessary
to prevent prejudicing the party's interest in the arbitration
(``eligible health condition'').\17\ Under the proposed rule change,
the party would not be required to disclose the details of their
medical diagnosis or prognosis with the certification.\18\
Additionally, a party's certification made pursuant to proposed Rules
12808(a)(1)(B) and 13808(a)(1)(B) would not alone be sufficient grounds
to compel the production of information concerning, or allow
questioning at any hearing about, the party's medical condition,
diagnosis or prognosis.\19\
---------------------------------------------------------------------------
\17\ See Notice at 105130.
\18\ Proposed Rules 12808(a)(1)(B) and 13808(a)(1)(B).
\19\ Proposed Rules 12808(a)(2) and 13808(a)(2).
---------------------------------------------------------------------------
c. Requests by Other Parties for Accelerated Processing
Proposed Rules 12808(a)(3) and 13808(a)(3) would allow parties who
do not meet the eligibility requirements of proposed Rules 12808(a)(1)
and 13808(a)(1), but may benefit from shortened proceedings, to request
that the panel consider other factors, including a party's age and
health, when scheduling hearings and discovery, briefing, and motions
deadlines.\20\
---------------------------------------------------------------------------
\20\ See Notice at 105130.
---------------------------------------------------------------------------
2. Determination of Eligibility
Proposed Rules 12808(b)(1) and 13808(b)(1) would require the
Director to determine if a party's request for accelerated processing
complies with the requirements of proposed Rules 12808(a)(1) and
13808(a)(1). FINRA stated that the Director would make an objective
determination as to whether the requesting party is at least 70 years
of age or has submitted the required certification regarding an
eligible health condition.\21\ FINRA stated that the proposed rule
change would not require any assessment by the Director regarding the
reasonableness of the requesting party's belief that accelerated
processing is necessary.\22\
---------------------------------------------------------------------------
\21\ Id.
\22\ Id.
---------------------------------------------------------------------------
3. Accelerating the Proceedings
If the Director determines that a request complies with the
requirements of proposed Rules 12808(a)(1) and 13808(a)(1), the
proposed rule change would accelerate the proceedings in three ways.
First, the arbitrator selection process would be accelerated by
shortening the deadlines for the Director to send the list of potential
arbitrators to the parties.\23\ Second, the arbitrators would receive
direction on how quickly the arbitration should be completed.\24\
Third, certain of the default deadlines that apply to parties under the
Code would be shortened.\25\
---------------------------------------------------------------------------
\23\ Id.; proposed Rules 12808(b)(2)(A) and 13808(b)(2)(A).
\24\ See Notice at 105131; proposed Rules 12808(b)(2)(B),
12808(b)(2)(C), 13808(b)(2)(B), and 13808(b)(2)(C).
\25\ See Notice at 105131; proposed Rules 12808(b)(2)(D) and
13808(b)(2)(D).
---------------------------------------------------------------------------
a. Accelerating the Arbitrator Selection Process
The first way that the proposed rule change would accelerate the
proceedings is by requiring that the Director send out the lists of
potential arbitrators to the parties more quickly than under the
current program. Currently, the Director must send the lists of
potential arbitrators to the parties ``within approximately 30 days
after the last answer is due,'' regardless of the parties' agreement to
extend any answer due date.\26\ The proposed rule change would amend
the timeframe that the Director must send the list out to all parties
in an accelerated proceeding. Specifically, proposed Rules
12808(b)(2)(A) and 13808(b)(2)(A) would require the Director to send
the arbitrator lists ``as soon as practicable after the last answer is
due, notwithstanding any agreement of the parties to extend any answer
due date.'' \27\
---------------------------------------------------------------------------
\26\ See Notice at 105131; see also FINRA Rules 12402(c)(1),
12403(b)(1), and 13403(c)(1).
\27\ See Notice at 105131.
---------------------------------------------------------------------------
b. Guidance to Arbitrators Regarding Completion of the Arbitration
The second way that the proposed rule change would accelerate
proceedings is to provide arbitrators with direction as to how quickly
the case should be completed. Specifically, under proposed Rules
12808(b)(2)(B) and 13808(b)(2)(B), the panel would be required to
endeavor to render an award within 10 months of the date the Director
determines that a case is subject to accelerated processing. In
addition, proposed Rules 12808(b)(2)(C) and 13808(b)(2)(C) would
require the panel to hold a prehearing conference at which it would be
required to set discovery, briefing, and motions deadlines, and
schedule hearing sessions, that are consistent with rendering an award
within 10 months or less. FINRA stated that, to provide the arbitrators
with sufficient flexibility to accommodate the particular circumstances
of each case, the proposed rule change would ``establish a benchmark
but would not mandate that all cases be completed within 10 months.''
\28\
---------------------------------------------------------------------------
\28\ See Notice at 105131.
---------------------------------------------------------------------------
c. Shortening Party Deadlines
Finally, the proposed rule change would accelerate proceedings by
shortening the following default deadlines that apply to parties under
the Codes:
<bullet> Serving an Answer: Under the Codes, a respondent must
serve the signed and dated Submission Agreement \29\ and answer on each
party within 45 days of receipt of the statement of claim.\30\ In an
accelerated proceeding, proposed Rules 12808(b)(2)(D)(i) and
13808(b)(2)(D)(i) would require a respondent to serve the Submission
Agreement and answer within 30 days of receipt of the statement of
claim.\31\
---------------------------------------------------------------------------
\29\ The FINRA Submission Agreement is a document that parties
must sign at the outset of an arbitration in which they agree to
submit to arbitration under the Codes. FINRA Rules 12100(dd) and
13100(ee).
\30\ See Notice at 105131; FINRA Rules 12303 and 13303.
\31\ See Notice at 105131.
---------------------------------------------------------------------------
<bullet> Responding to a Third Party Claim: Under the Codes, a
party responding to a third party claim must serve all other parties
with the signed and dated Submission Agreement and answer within 45
days of receipt of the third party claim.\32\ In an accelerated
proceeding, proposed Rules 12808(b)(2)(D)(ii) and 13808(b)(2)(D)(ii)
would require a party responding to a third party claim to serve the
Submission Agreement and answer within 30 days of receipt of the third
party claim.\33\
---------------------------------------------------------------------------
\32\ Id.; FINRA Rules 12306 and 13306.
\33\ See Notice at 105131.
---------------------------------------------------------------------------
<bullet> Completing Arbitrator Lists: Under the Codes, parties must
return the ranked arbitrator lists of each separately
[[Page 12618]]
represented party to the Director no more than 20 days after the date
upon which the Director sends the arbitrator lists to the parties.\34\
In an accelerated proceeding, proposed Rules 12808(b)(2)(D)(iii) and
13808(b)(2)(D) (iii) would require parties to return the ranked
arbitrator lists to the Director no more than 10 days after the
Director sends the arbitrator lists to the parties.\35\
---------------------------------------------------------------------------
\34\ See Notice at 105131; FINRA Rules 12403 and 13404.
\35\ See Notice at 105131.
---------------------------------------------------------------------------
<bullet> Discovery in Customer Cases: Under the Customer Code,
parties in customer cases are required to produce to all other parties
documents that are described in the Document Production Lists on
FINRA's website,\36\ explain why specific documents cannot be produced,
or object and file an objection with the Director within 60 days of the
date that the answer to the statement of claim or third party claim is
due, unless the parties agree otherwise.\37\ In an accelerated
proceeding, proposed Rule 12808(b)(2)(D)(iv) would require parties in
customer cases to respond to the Document Production Lists within 35
days of the date the answer to the statement of claim is due, or, for
parties added by amendment or third party claim, within 35 days of the
date their answer is due, unless the parties agree otherwise.\38\
---------------------------------------------------------------------------
\36\ See 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.
\37\ See FINRA Rule 12506.
\38\ See Notice at 105131.
---------------------------------------------------------------------------
<bullet> Other Discovery Requests: Under the Codes, parties must
respond within 60 days from the date a discovery request other than the
Document Production Lists is received, unless the parties agree
otherwise.\39\ In an accelerated proceeding, proposed Rules
12808(b)(2)(D)(v) and 13808(b)(2)(D)(iv) would require the party
receiving the discovery request other than the Document Production
Lists to respond to the discovery request pursuant to Rule 12507(b)(1)
and 13507 within 30 days from the date it was received, unless the
parties agree otherwise.\40\
---------------------------------------------------------------------------
\39\ Id.; FINRA Rules 12507 and 13507.
\40\ See Notice at 105131-105132.
---------------------------------------------------------------------------
FINRA stated that, based on its experience, FINRA believes these
proposed shortened deadlines are reasonable and would not compromise
the fairness of the accelerated arbitration proceedings because they
would be manageable in most cases. FINRA further stated that
arbitrators and parties could extend the proposed deadlines if
warranted.\41\ For example, there may be some cases in which the
complexity of the case, the volume of discovery, or other factors may
justify extending these proposed deadlines.\42\ In these circumstances,
the existing provisions of the Codes would provide the parties and
arbitrators with the flexibility to address the unique facts and
circumstances of each case.\43\ Specifically, FINRA Rules 12207(a) and
13207(a) allow parties to agree to extend or modify any deadline for
serving an answer, returning the ranked arbitrator or chairperson
lists, responding to motions, or exchanging documents or witness
lists.\44\ Additionally, FINRA Rules 12207(b) and 13207(b) allow the
panel to extend or modify any deadline for serving an answer,
responding to motions, exchanging documents or witness lists, or any
other deadline set by the panel, either on its own initiative or upon
motion of a party.\45\ Finally, FINRA Rules 12508(b) and 13508(b) allow
the panel to extend the time for a party to object to discovery
requests if the party has ``substantial justification for failing to
make the objection within the required time.'' \46\ While these
provisions in the Codes provide the panel and the parties with
flexibility to modify the shortened deadlines in the proposed rule
change, FINRA expects the extensions to be the exception and not the
rule.\47\ FINRA stated that if the Commission approves the proposed
rule change, it would provide training and guidance to arbitrators on
accelerated processing, which would include training on evaluating
requests to extend the proposed shortened deadlines.\48\
---------------------------------------------------------------------------
\41\ See Notice at 105132.
\42\ Id.
\43\ Id.
\44\ Id.
\45\ Id.
\46\ Id.
\47\ Id.
\48\ Id.
---------------------------------------------------------------------------
III. Proceedings To Determine Whether To Approve or Disapprove File No.
SR-FINRA-2024-021 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Exchange Act to determine whether the proposed rule
change should be approved or disapproved.\49\ Institution of
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule change. Institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to the proposed rule change.
---------------------------------------------------------------------------
\49\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Exchange Act, the Commission
is providing notice of the grounds for disapproval under
consideration.\50\ The Commission is instituting proceedings to allow
for additional analysis and input concerning whether the proposed rule
change is consistent with the Exchange Act and the rules thereunder.
---------------------------------------------------------------------------
\50\ Id.
---------------------------------------------------------------------------
IV. Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposed rule change. In particular, the Commission invites
the written views of interested persons concerning whether the proposed
rule change is consistent with the Exchange Act and the rules
thereunder.
Although there do not appear to be any issues relevant to approval
or disapproval that would be facilitated by an oral presentation of
views, data, and arguments, the Commission will consider, pursuant to
Rule 19b-4, any request for an opportunity to make an oral
presentation.\51\
---------------------------------------------------------------------------
\51\ Section 19(b)(2) of the Exchange Act, as amended by the
Securities Acts Amendments of 1975, Public Law 94-29, 89 Stat. 97
(1975), grants the Commission flexibility to determine what type of
proceeding--either oral or notice and opportunity for written
comments--is appropriate for consideration of a particular proposal
by a self-regulatory organization. See Securities Acts Amendments of
1975, Report of the Senate Committee on Banking, Housing and Urban
Affairs to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess.
30 (1975).
---------------------------------------------------------------------------
Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change should be approved
or disapproved by April 8, 2025. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
April 22, 2025.
Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3745425b521a54585a5a525943447744525419505841"><span class="__cf_email__" data-cfemail="1163647d743c727e7c7c747f6562516274723f767e67">[email protected]</span></a>. Please include
file number SR-FINRA-2024-021 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-FINRA-2024-021. This
file
[[Page 12619]]
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of FINRA. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection.
All submissions should refer to file number SR-FINRA-2024-021 and
should be submitted on or before April 8, 2025. If comments are
received, any rebuttal comments should be submitted on or before April
22, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\52\
---------------------------------------------------------------------------
\52\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-04329 Filed 3-17-25; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on March 18, 2025.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.