FINRA Makes It Nearly Impossible To Dismiss Arbitrations
FINRA has adopted rules making it much more difficult to obtain a motion to dismiss a claim in FINRA arbitration. Under the new rule, an arbitration panel can only grant a motion to dismiss before a claimant has presented his/her case if there is a “factual impossibility” i.e. that the respondent “could not have been associated with the conduct.” Also, a motion to dismiss could only be granted after a hearing and by a unanimous decision. If a respondent loses the motion, it must pay the costs of the party to respond. Also, FINRA can assess sanctions and penalties if it determines that the motion was filed in bad faith.
OUR TAKE: We wonder if FINRA arbitration is really the best venue for broker-dealers. Precluding a respondent from making a motion to dismiss invites frivolous claims by customers.