Clinic Comments on FINRA Proposal to Require Electronic Portal for Proceedings

As part of its mission of serving regular investors, the Investor Advocacy Clinic reviews FINRA rule proposals and submits comments after fully evaluating the proposal.  Earlier this week, the clinic commented on FINRA SR-2016-029, a proposal that would require all parties who are represented in a FINRA proceeding to use FINRA’s electronic Party Portal to “file initial statements of claim and to file and serve pleadings and other documents on FINRA or any other party” and “to file and serve correspondence relating to discovery requests.”

The clinic’s comment, drafted primarily by fall 2016 student intern Michael Williford, praised FINRA for taking steps to increase access and efficiency by requiring represented parties to use the Party Portal as opposed to filing paper copies of pleadings and other materials.  Though the proposal is a step in the right direction, the clinic identified two potential problems with the proposal and asked FINRA to institute changes to correct each.

First, the clinic noted that claimants in smaller cases may not have the capability to remit payment for filing fees electronically, a reality that might lead some parties to initiate a claim without counsel to evade the rule’s electronic filing requirement.  Additionally, the electronic filing requirement might also result in lawyers turning down smaller cases and more claimants attempting to file cases without representation.  Thus, the clinic believes that proceedings where the claimant seeks damages less than $100,000 should be exempted from the electronic payment provisions.

Second, the clinic identified serious concerns with the proposal because it does not require parties to protect the personal confidential information of parties in simplified arbitration proceedings.  While parties in proceedings requesting more than $50,000 in damages must redact information that could be used by identity thieves, the redaction requirement has not been extended to these “small” claims even though those claims must now be filed electronically if a party has representation.  The clinic reiterated its earlier comments on the redaction rule and noted the particular importance of redacting personal confidential information if a proceeding is filed electronically.

Click here to read the Clinic’s comment letter in its entirety along with other comment letters on the proposal.