Part 8: FINRA Dispute Resolution Task Force: Enhancing Securities Dispute Resolution One Recommendation At A Time. Professionalism and Funding to Law School Arbitration Clinics.

alexhughesBy: Alexandra Hughes, Spring 2016 Graduate Research Assistant

  1. Professionalism

The task force received complaints concerning the unprofessional conduct of attorneys at arbitration proceedings. These complaints recommended that badly behaving attorneys be punished for their inappropriate conduct by being ineligible to practice within FINRA’s arbitration forum. The task force declined to follow these recommendations and instead stated that attorney bad behavior is best handled by the chairperson or state disciplinary authorities—in Georgia, this is the State Bar of Georgia.

Additionally, the task force received complains about the poor performance of compensated non-attorney representatives (NARs). In 2007, pursuant to FINRA Rule 11208(c) FINRA allowed parties to begin being represented by a non-attorney unless: state law prohibits it, the person is suspended or barred from the securities industry, or the person is suspended or disbarred from the practice of law. Because the task force received comments about whether NARs actually provide a service to investors, the task force recommended a study be conducted to determine:

  • How many jurisdictions allow NARs to represent customers in FINRA arbitration and mediation
  • Whether NARs provide a service to investors with small claims otherwise unable to obtain representation
  • Whether NARs are representing investors competently
  1. Funding to Law School Arbitration Clinics

The task force also received comments regarding funding to law school arbitration clinics. The FINRA Investor Education Foundation provides three-year grants to law schools desiring to establish clinics which provide assistance to customers with small claims unable to acquire other legal representation. Law school clinics fill this important niche in the securities industry. Each law school clinic grant is $250,000. The Georgia State University Investor Advocacy Clinic is one such law school that received a grant and is the first investor clinic in the state of Georgia.

Although the task force received reports that some clinics would be forced to close after the three-year grant period, the task force did not give a recommendation to expand funding for law school clinics. The task force did not want to second-guess the Foundation’s policy of limiting grants to three-years. However, the task force did recommend using collected FINRA fines and penalties as a source of funding for law school clinics otherwise unable to sustain themselves outside of the three-year grant period.

The full task force report is available online.