[Federal Register Volume 90, Number 163 (Tuesday, August 26, 2025)]
[Notices]
[Pages 41603-41611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-16293]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103755; File No. SR-FINRA-2024-021]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Approving 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
August 21, 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
[[Page 41604]]
Processing).\3\ The proposed rule change would accelerate the
processing of arbitration proceedings for parties who qualify based on
their age or health condition.\4\
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\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'').
\4\ Id.
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The proposed rule change was published for public comment in the
Federal Register on December 26, 2024.\5\ The public comment period
closed on January 16, 2025. The Commission received comment letters in
response to the Notice.\6\ 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.\7\ On March 12, 2025, FINRA responded to
the comment letters received in response to the Notice.\8\ On March 12,
2025, the Commission published an order instituting proceedings
(``OIP'') to determine whether to approve or disapprove the proposed
rule change.\9\ The OIP public comment period closed on April 8, 2025.
The Commission received one additional comment letter in response to
the OIP.\10\ On June 11, 2025, FINRA consented to extend until August
22, 2025, the time period in which the Commission must approve or
disapprove the proposed rule change.\11\ This order approves the
proposed rule change.
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\5\ Id.
\6\ The comment letters are available at https://www.sec.gov/comments/sr-finra-2024-021/srfinra2024021.htm.
\7\ See letter from Kristen Vo, Assistant General Counsel,
Office of General Counsel, FINRA, dated January 21, 2025, https://www.finra.org/sites/default/files/2025-01/FINRA-2024-021-Extension1.pdf.
\8\ See letter from Kristine Vo, Assistant General Counsel,
Office of General Counsel, FINRA, dated March 12, 2025, https://www.sec.gov/comments/sr-finra-2024-021/srfinra2024021.htm (``FINRA
Response Letter'').
\9\ See Exchange Act Release No. 102641 (Mar. 12, 2025), 90 FR
12616 (Mar. 18, 2025) (File No. SR-FINRA-2024-021).
\10\ See supra note 6.
\11\ See letter from Kristen Vo, Assistant General Counsel,
Office of General Counsel, FINRA, dated June 11, 2025, https://www.finra.org/sites/default/files/2025-06/2024-021x2.pdf.
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II. Description of the Proposed Rule Change
A. Background
FINRA's Dispute Resolution Services (``DRS'') provides a forum for
disputes between customers, member firms, and associated persons of
member firms.\12\ FINRA 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 stated that when an eligible party makes a request to
expedite arbitration 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.'' \13\ However, the
current program does not provide for shortened, rules-based deadlines
for parties or provide arbitrators with guidance 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.'' \14\
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\12\ 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).
\13\ See Notice at 105128.
\14\ Id.
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FINRA's proposed rule change would accelerate case processing by
codifying shortened case-processing deadlines for eligible parties and
providing guidance to arbitrators regarding how quickly they should
endeavor to complete an arbitration proceeding.\15\ 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 with a serious health condition.\16\
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\15\ Id.
\16\ Id. (stating that the median time for customer arbitrations
that are not in the current program is approximately 15.7 months).
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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 or 13302 or filing an answer pursuant to
FINRA Rules 12303 or 13303 if they meet one of two eligibility
requirements based on their age or health condition.\17\ The proposed
rule change would also continue to allow parties who do not meet an
eligibility requirement to request that the panel consider other
factors, including their age and health, when scheduling hearings and
discovery, briefing, and motions deadlines.\18\
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\17\ Proposed Rules 12808(a) and 13808(a).
\18\ Proposed Rules 12808(a)(3) and 13808(a)(3).
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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.
FINRA stated that parties who are 70 years of age and older are
more likely than younger individuals to become seriously ill or die
before the outcome of their arbitration proceeding. As such, they are
less likely to be able to meaningfully participate throughout the
course of a lengthy arbitration proceeding, which could affect the
outcome of their claim.\19\ FINRA stated that because the proposed rule
change would make it more likely that these parties are able to
meaningfully participate for the duration of an arbitration proceeding,
the proposed rule change would help ensure that the outcomes of their
cases accurately reflect the underlying merits.\20\
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\19\ See Notice at 105129.
\20\ Id.
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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
(``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''). Under the proposed rule
change, the party would not be required to disclose the details of
their medical diagnosis or prognosis with the certification.\21\
Additionally, a party's certification would not alone be sufficient
grounds to compel the production of information concerning, or allow
questioning at any hearing
[[Page 41605]]
about, the party's health condition, diagnosis or prognosis.\22\
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\21\ Proposed Rules 12808(a)(1)(B) and 13808(a)(1)(B).
\22\ Proposed Rules 12808(a)(2) and 13808(a)(2).
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FINRA stated that it is appropriate to allow parties, regardless of
age, to qualify for accelerated processing based on an eligible health
condition because they may be unable to meaningfully participate in a
lengthy arbitration proceeding, which, in turn, could affect the
outcome of the proceeding.\23\ FINRA further stated that the proposed
certification requirement is the most appropriate method to identify
those individuals with an eligible health condition because it would
minimize unnecessary intrusions into a party's private health
information.\24\ Moreover, FINRA stated that by prohibiting a party
from using an opponent's request for accelerated processing as the sole
basis to seek discovery into their health condition, the proposed rule
change would further address privacy concerns.\25\
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\23\ See Notice at 105130.
\24\ Id.
\25\ FINRA also stated, however, that the proposed rule change
would not address a party's ability to request medical information
for other appropriate reasons that are unrelated to the
certification. Id.
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c. Requests by Parties Ineligible for Accelerated Processing
Proposed Rules 12808(a)(3) and 13808(a)(3) would allow parties who
may benefit from shortened proceedings, but do not qualify for
accelerated processing under the age or health eligibility requirements
of proposed Rules 12808(a)(1) or 13808(1), to request that the panel
consider other factors, including a party's age and health, when
scheduling hearings and discovery, briefing, and motions deadlines.
FINRA stated that some parties who would not be eligible to request
accelerated processing based on either their age or their health
condition, might still benefit if their arbitrations were completed
more quickly.\26\ FINRA further stated that although these proceedings
would not be subject to the shortened, rules-based deadlines of the
proposed rule change, the panel may determine, at a party's request, to
expedite the proceedings based on the party's particular
circumstances.\27\
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\26\ See Notice at 105130.
\27\ Id.
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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) or
13808(a)(1). FINRA stated that, under the proposed rules, 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.\28\ FINRA further
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.\29\
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\28\ Id.
\29\ Id.
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3. Accelerated Proceedings
If the Director determines that a request complies with the
requirements of proposed Rules 12808(a)(1) or 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.\30\ Second, the arbitrators would receive guidance on how
quickly they should endeavor to complete arbitrations.\31\ Third,
certain of the default deadlines that apply to the parties under the
Codes would be shortened.\32\
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\30\ See Proposed Rules 12808(b)(2)(A) and 13808(b)(2)(A).
\31\ See Proposed Rules 12808(b)(2)(B), 12808(b)(2)(C),
13808(b)(2)(B), and 13808(b)(2)(C).
\32\ See Proposed Rules 12808(b)(2)(D) and 13808(b)(2)(D).
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a. Accelerated Arbitrator Selection
The first way that the proposed rule change would accelerate the
proceedings would be 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.\33\ 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.''
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\33\ See FINRA Rules 12402(c)(1), 12403(b)(1), and 13403(c)(1).
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FINRA stated that by requiring that the Director send the
arbitrator lists ``as soon as practicable'' after the last answer is
due, it would signal that the lists must be sent shortly after the last
answer due date but would retain some flexibility for the Director in
sending the lists.\34\
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\34\ See Notice at 105131.
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b. Arbitrator Guidance Regarding Arbitration Completion Timeframe
The second way that the proposed rule change would accelerate
proceedings would be to provide arbitrators with guidance as to how
quickly they should endeavor to complete arbitrations. 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
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 by providing arbitrators with specific guidance
regarding how quickly they should endeavor to complete an arbitration,
the proposed rule change would be more likely to significantly reduce
the overall length of the proceedings in cases that qualify for
accelerated processing.\35\ However, FINRA also stated that by
establishing a benchmark but not mandating that all cases be completed
within 10 months, the proposed rule change would provide the
arbitrators with sufficient flexibility to accommodate the particular
circumstances of each case.\36\
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\35\ Id.
\36\ Id.
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c. Shortened Party Deadlines
Finally, the proposed rule change would accelerate proceedings by
shortening the following default deadlines that apply to parties under
the Codes:
Serving an Answer: Under the Codes, a respondent must
serve the signed and dated Submission Agreement \37\ and answer on each
party within 45 days of receipt of the statement of claim.\38\ In an
accelerated proceeding, proposed Rules 12808(b)(2)(D)(i) and
13808(b)(2)(D)(i) would shorten this deadline to within 30 days.
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\37\ See FINRA Rules 12100(dd) and 13100(ee). 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.
\38\ See FINRA Rules 12303 and 13303.
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[[Page 41606]]
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.\39\ In an accelerated
proceeding, proposed Rules 12808(b)(2)(D)(ii) and 13808(b)(2)(D)(ii)
would shorten this deadline to within 30 days.
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\39\ FINRA Rules 12306 and 13306.
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Completing Arbitrator Lists: Under the Codes, parties must
return the ranked arbitrator lists of each separately represented party
to the Director no more than 20 days after the date upon which the
Director sends the arbitrator lists to the parties.\40\ In an
accelerated proceeding, proposed Rules 12808(b)(2)(D)(iii) and
13808(b)(2)(D)(iii) would shorten this deadline to no more than 10
days.
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\40\ FINRA Rules 12403 and 13404.
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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,\41\ 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 is due, or, for parties
added by amendment or third party claim, within 60 days of the date
that their answer is due, unless the parties agree otherwise.\42\ In an
accelerated proceeding, proposed Rule 12808(b)(2)(D)(iv) would shorten
these deadlines to within 35 days unless the parties agree otherwise.
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\41\ 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.
\42\ See Id.
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Other Discovery Requests: Under the Codes, the party
receiving the request must respond within 60 days from the date a
discovery request other than the Document Production Lists is received,
unless the parties agree otherwise.\43\ In an accelerated proceeding,
proposed Rules 12808(b)(2)(D)(v) and 13808(b)(2)(D)(iv) would shorten
this deadline to within 30 days unless the parties agree otherwise.
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\43\ FINRA Rules 12507 and 13507.
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Based on FINRA's experience, FINRA believes these proposed
shortened deadlines are reasonable and would not compromise the
fairness of the arbitration proceedings because they would be
manageable in most cases.\44\ FINRA stated, however, that there may be
some accelerated processing cases in which the complexity of the case,
the volume of discovery, or other factors may justify extending these
proposed deadlines.\45\ FINRA stated that 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, for example: \46\
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\44\ See Notice at 105132.
\45\ Id.
\46\ Id.
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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;
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; and
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.''
While these provisions provide the panel and the parties with
flexibility to modify the shortened deadlines in the proposed rule
change, FINRA stated that it expects the extensions to be the exception
and not the rule.\47\ FINRA also 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\
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\47\ Id.
\48\ Id.
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III. Discussion and Commission Findings
After careful review of the proposed rule change, the comment
letters, and FINRA's response to comments, the Commission finds that
the proposed rule change is consistent with the requirements of the
Exchange Act and the rules and regulations thereunder that are
applicable to a national securities association.\49\ Specifically, the
Commission finds that the proposed rule change is consistent with
Section 15A(b)(6) of the Exchange Act, which requires, among other
things, that FINRA rules be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest.\50\
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\49\ In approving this rule change, the Commission has
considered the rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\50\ 15 U.S.C. 78o-3(b)(6).
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A. Requesting Accelerated Case Processing
1. Discussion
The proposed rule change would allow parties to request accelerated
processing of a case when initiating an arbitration pursuant to FINRA
Rules 12302 or 13302, or when filing an answer pursuant to FINRA Rules
12303 or 13303, if they meet an eligibility requirement based on their
age or health condition. The proposed rule change would also continue
to allow parties who do not meet an eligibility requirement to request
that the panel consider other factors, including their age and health,
when scheduling hearings and discovery, briefing, and motions
deadlines.\51\ The Commission addresses the proposed rule change's
specific provisions, and any related comments, in turn.
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\51\ See Proposed Rules 12808(a)(3) and 13808(a)(3).
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a. Eligibility Based on Age
As stated above, the proposed rule change 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.\52\
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\52\ See Proposed Rules 12808(a)(1)(A) and 13808(a)(1)(A).
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One commenter supported the proposed rule change, stating that the
proposed eligibility age of 70 or older supports FINRA's goal of
increasing the likelihood that the participant can meaningfully
participate through the resolution of a proceeding, leading to
``outcomes more accurately reflective of the underlying merits, while
balancing the number of expedited proceedings and the impact on other
individuals seeking timely arbitration of their cases.'' \53\ This
commenter also stated, however, that increasing the qualifying age to
70 or older could incentivize parties to improperly seek accelerated
processing such as by misrepresenting their age. This commenter
[[Page 41607]]
recommended that arbitrators sanction such parties by removing their
cases from accelerated processing, stating that ``removal of
participants who wrongfully were granted an accelerated arbitration
process is a natural consequence and fitting deterrent to ensure people
do not try to `cut the line.' '' \54\
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\53\ See Letter from David T. Bellaire, Executive Vice President
& General Counsel, Financial Services Institute, dated January 16,
2025, at 2, https://www.sec.gov/comments/sr-finra-2024-021/srfinra2024021-557555-1598982.pdf (``FSI'') (basing its support, in
part, on the proposed rule change permitting those under 70 to
request accelerated processing of their arbitration case based on a
certified medical condition).
\54\ FSI at 2-3 (citing the sanctioning authority in FINRA Rules
12212(a) and 13212(a)).
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Four other commenters generally supported the proposed rule change
but suggested lowering the eligibility age from 70 or older, as FINRA
proposed, to 65 or older for various reasons.\55\ One of these
commenters stated that lowering the eligibility age to 65 or older
would be unlikely to increase the administrative burden on FINRA but
would have a ``significant impact on the individuals who would be
covered.'' \56\ A second commenter suggested lowering the eligibility
age to 65 or older, in part, because parties who are at least 65 years
of age are very likely to be retirees on fixed incomes for whom ``time
is of the essence.'' \57\ This second commenter also stated that such
parties are more likely to be in proceedings where the party is
represented by one of the ten law school securities arbitration
clinics, and that reducing the length of arbitration would allow for
``continuity of representation and enhanced learning opportunities for
students.'' \58\ A third commenter opposed the proposed eligibility age
of 70 or older, in favor of an eligibility age of 65 or older, stating
that ``while life expectancy has increased in the United States, so
have age-related health issues . . . making it more difficult for
individuals over 65 to endure prolonged arbitration.'' \59\ This
commenter also stated that 65 is the traditional retirement age and
``is commonly used as a benchmark for senior benefits and legal
protections.'' \60\ The fourth commenter also recommended lowering the
eligibility age to 65 years or older, stating that ``FINRA [failed] to
offer any viable explanation for the proposed increase or the selection
of 70 years of age as being the proper cut-off . . . .'' \61\
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\55\ See Letters from Jaclyn Rommeney, Legal Intern, Chris
O'Connor, Legal Intern, Joseph Alfonzetti, Legal Intern, Professor
Elissa Germaine, Esq., Supervising Attorney, and Professor Christine
Lazaro, Esq., Supervising Attorney, Securities Arbitration Clinic,
St. Vincent De Paul Legal Program, Inc., St. John's University
School of Law, dated January 16, 2025, at 2, https://www.sec.gov/comments/sr-finra-2024-021/srfinra2024021-557715-1599282.pdf (``St.
John's'') (supporting the proposed eligibility age of 70 or older,
but suggesting FINRA consider lowering the eligibility age to 65 or
older); Alice L. Stewart, Associate Professor of Law, Director of
Legal Clinics, Rachael T. Shaw, Staff Attorney/Adjunct Law
Professor, Minu Nagashunmugam, Certified Student Attorney, and Danny
O'Byrne, Certified Student Attorney, Securities Arbitration Clinic,
University of Pittsburgh School of Law, dated January 16, 2025, at
5-6, https://www.sec.gov/comments/sr-finra-2024-021/srfinra2024021-557476-1598962.pdf (``UPitt''); Adam Gana, President, Public
Investors Advocate Bar Association, dated January 16, 2025, at 2,
https://www.sec.gov/comments/sr-finra-2024-021/srfinra2024021-557435-1598903.pdf (``PIABA''); Steven Caruso, dated January 18,
2025, at 1, https://www.sec.gov/comments/sr-finra-2024-021/srfinra2024021-558095-1600682.html (``Caruso'').
\56\ St. John's at 2 (stating that lowering the triggering age
to 65 would increase the number of claimants who would qualify for
accelerated processing from 20 percent to 26 percent).
\57\ UPitt at 10; see also PIABA at 2 (stating that ``investors
over 65 are often living on fixed incomes, making prolonged
arbitration particularly burdensome'').
\58\ UPitt at 6 (accelerated proceedings would allow the same
student attorney to represent a claimant during the entire
proceeding).
\59\ See PIABA at 2.
\60\ Id.
\61\ See Caruso at 1.
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Another commenter, on the other hand, questioned the need for
parties who are otherwise healthy to qualify for accelerated processing
based solely on age.\62\ This commenter stated that the ``use of age as
a criterion is speculative, arbitrary, and untenable, and without more
insufficient to justify the changes contemplated'' by the proposed rule
change.\63\ In the alternative, the commenter recommended an
eligibility age of at least 75 years old as ``the most reasonable
compromise,'' because ``the eventualities presumed by the current
Proposal become less speculative'' as the ``litigant's age increases.''
\64\
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\62\ See Letter from Seth A. Miller, General Counsel, President,
Advocacy & Administration, Cambridge Investment Research, Inc.,
dated January 15, 2025, at 2, https://www.sec.gov/comments/sr-finra-2024-021/srfinra2024021-557055-1597802.pdf (``Cambridge'').
\63\ Id.
\64\ Id.
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In response, FINRA stated that an eligibility age is warranted to
account for elderly parties who may be otherwise healthy at the outset
of the arbitration but may become more likely to become seriously ill
(or potentially deceased) during the arbitration proceeding because of
their age.\65\ More specifically, FINRA supported maintaining the
proposed age eligibility requirement at 70 or older for multiple
reasons.\66\ First, FINRA stated that while lowering the proposed age
eligibility requirement from 70 or older to 65 or older would affect
only approximately six percent of claimants, the resulting increase in
the number of accelerated cases could overburden arbitrators, making it
difficult for them to comply with their obligations to endeavor to hold
hearings and render an award within 10 months or less.\67\ As such,
FINRA suggested that reducing the age eligibility to 65 or older could
undermine the proposed rule change's stated objective--to materially
shorten the length of the proceedings.\68\ Similarly, FINRA stated that
arbitrators are often involved in more than one arbitration at the same
time; as such, further increasing the number of accelerated cases could
cause arbitrators to extend the case processing times of their
concurrent, non-accelerated arbitrations to meet the shortened
deadlines that would apply to their accelerated arbitrations.\69\ In
addition, FINRA stated that, under the proposed rule change, parties
who are younger than 70 would still have an opportunity to request
accelerated processing if they have a serious health condition, or
other factor that could be considered by a panel.\70\ Specifically,
FINRA stated that ``parties who would not qualify for accelerated
processing based on either their age or health condition would be able
to request, once the panel is appointed, that the panel consider other
factors, including their age or a change in their health condition
during the arbitration proceeding, when scheduling hearings and
discovery, briefing, and motion deadlines.'' \71\ Finally, FINRA stated
that raising the proposed age eligibility requirement above 70 would
deny accelerated processing to many parties who are at higher risk of
becoming seriously ill, experiencing an adverse health condition, or
not living to see the outcome of an arbitration.\72\
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\65\ See FINRA Response Letter at 2.
\66\ Id. at 2-4.
\67\ Id. at 3.
\68\ Id.
\69\ Id. at 3-4.
\70\ Id. at 4.
\71\ Id.
\72\ Id. at 2 n. 5.
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For these reasons, FINRA declined to adopt the commenters'
suggested alternatives.\73\ FINRA, however, stated that it would
monitor the new program to determine if adjustments to the eligibility
age for qualification are warranted.\74\ FINRA also stated that it
would update its guidance to arbitrators to clarify that potential
sanctions may include the ability to remove a matter from accelerated
processing if parties are found to have either misrepresented their age
or health condition to qualify for accelerated processing.\75\
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\73\ Id. at 2-4.
\74\ Id. at 4.
\75\ Id. at 6.
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b. Eligibility Based on Health Condition
As stated above, the proposed rule change would allow a party to
request
[[Page 41608]]
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.\76\ An eligible party would
not be required to disclose the details of their medical diagnosis or
prognosis with the certification, nor would a party's certification
alone be sufficient grounds to compel the production of information
concerning, or allow questioning at any hearing about, the party's
health condition.\77\
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\76\ See Proposed Rules 12808(a)(1)(B) and 13808(a)(1)(B).
\77\ Id.; see also proposed Rules 12808(a)(2) and 13808(a)(2).
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Six commenters supported the proposed rule change permitting a
party with an eligible health condition to request accelerated
processing of a case.\78\ One of these commenters stated that
shortening case-processing deadlines for parties with a serious health
condition would be ``meritorious and beneficial to the arbitration
process.'' \79\ Another one of these commenters stated that it
appreciated the proposed rule change's inclusion of safeguards that
would protect parties' private health information.\80\
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\78\ See Caruso; St John's; UPitt; PIABA; Cambridge; FSI.
\79\ Caruso at 1.
\80\ St. John's at 3 (referencing the provision making clear
that a party does not open the door to discovery into their health
condition merely by requesting accelerated processing); see also
UPitt at 7 (stating that the proposed rule change would provide
``the proper amount of flexibility and disclosure while protecting a
party's privacy'').
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Two otherwise supportive commenters, however, expressed concerns
about the medical certification requirement.\81\ One of these
commenters stated that requiring claimants to produce medical records
to qualify for expedited proceedings would be ``invasive, unnecessary,
and contrary to the spirit of the proposed rule.'' \82\ The other
commenter stated that the proposed rule change ``lacks any meaningful
controls to preclude misuse'' and suggested that parties be required to
provide proof of their health condition before it can trigger
accelerated processing.\83\
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\81\ See PIABA at 1-2; Cambridge at 2-3.
\82\ PIABA at 1-2.
\83\ Cambridge at 2 (suggesting that the ``most objective
qualification criteria'' would be for parties to obtain a ``medical
certification'' in a manner similar to how one would obtain a
Disability Parking Placard).
---------------------------------------------------------------------------
One supportive commenter recommended sanctioning participants found
to have misrepresented either their age or medical condition.\84\
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\84\ FSI at 2-3 (suggesting that FINRA remove their case from
expedited arbitration and the required deadlines using FINRA Rules
12212(a) and 13212(a) to impose sanctions addressing improper
conduct).
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In response to the commenter's privacy concerns, FINRA stated that
the proposed certification requirement is the most appropriate way to
minimize unnecessary intrusions into a party's private health
information, while allowing FINRA to identify those individuals who
could benefit most from accelerated processing because they have an
eligible health condition.\85\ Moreover, FINRA noted that a party's
certification would not alone be ``sufficient grounds to compel
production of information concerning, or to allow questioning at any
hearing about, the party's medical condition.'' \86\
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\85\ See FINRA Response Letter at 5.
\86\ Id.
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In response to commenters' concerns about potential
misrepresentations, FINRA stated that it has no evidence that parties
have falsely claimed to have a serious health condition under the
current program nor any reason to believe that this kind of misconduct
would be more likely under the proposed rule change.\87\ FINRA further
stated that the threat of potential sanctions under existing FINRA
Rules 12212 and 13212 (such as assessing monetary penalties payable to
one or more parties; precluding a party from presenting evidence;
making an adverse inference against a party; assessing postponement and
forum fees; and assessing attorneys' fees, costs and expenses) should
help deter parties from falsely certifying that they have been
diagnosed with an eligible health condition.\88\
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\87\ Id.
\88\ Id.
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For these reasons, FINRA declined to amend the proposed rule
change.\89\ In response to the commenter's recommendation to sanction
participants found to have misrepresented their age or medical
condition, FINRA stated that it would update its guidance to
arbitrators to clarify that potential sanctions may include the ability
to remove a matter from accelerated processing if parties are found to
have either misrepresented their age or health condition to qualify for
accelerated processing.\90\ FINRA also stated that it would monitor the
new program for indications that misrepresentations are occurring, as
well as to determine if adjustments to the criteria for qualification
based on an eligible health condition are warranted.\91\
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\89\ Id. at 4-6.
\90\ Id. at 6.
\91\ Id.
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c. Requests by Parties Ineligible for Accelerated Processing
As stated above, the proposed rule change would allow parties who
do not meet the age or health condition eligibility requirements to
request that the panel consider other factors, including a party's age
and health condition, when scheduling hearings and discovery, briefing,
and motions deadlines.\92\ If such a request is approved, the party's
proceeding would not be subject to the shortened, rules-based deadlines
of the proposed rule change; rather, the panel may instead determine to
expedite the proceedings based on the party's particular
circumstances.\93\
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\92\ Proposed Rules 12808(a)(3) and 13808(a)(3).
\93\ Id.; see also Notice at 105130.
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One commenter supported accelerated processing for parties based on
their age or health condition but suggested FINRA adopt eligibility
requirements that account for the ``disparities in life expectancies''
associated with ethnicity and geography.\94\ This commenter also
recommended that FINRA consider additional options for pro se parties
who may not be equipped to request accelerated processing if they do
not meet the proposed eligibility requirements.\95\
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\94\ See St. John's at 2.
\95\ Id.
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Another commenter supported this proposed rule change but stated
that without set deadlines, participants who do not qualify for
accelerated processing based on either their age or health condition
would continue to experience ``waits longer than thirteen months.''
\96\ This commenter therefore suggested that at a minimum, FINRA
provide training and guidance to arbitrators on setting deadlines so
that parties facing age or health-related difficulties but who do not
meet the proposed eligibility requirements do not face unreasonably
long wait times.\97\
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\96\ UPitt at 7.
\97\ Id.; see also Caruso at 1 (stating that there is ``an
absence of any discussion of the enhanced arbitrator training that
must be associated with the proposed new rules so that arbitrators
have the required guidance that will be needed to effectively
implement the proposed new rules.'').
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In response to the commenter's recommendation that FINRA adopt
eligibility requirements that account for
[[Page 41609]]
``disparities in life expectancies,'' FINRA acknowledged that there are
parties who could benefit if their arbitration cases were accelerated
but who would not qualify for accelerated processing under the proposed
rule change.\98\ However, FINRA stated that it is concerned that ``an
approach based on multiple additional factors could become too complex
to be workable.'' \99\ In addition, FINRA stated that a further
increase in the number of parties eligible for accelerated processing
could impact arbitrators' collective ability to hold hearings and
render awards within 10 months or less.\100\
---------------------------------------------------------------------------
\98\ See FINRA Response Letter at 6.
\99\ Id.
\100\ Id. at 7.
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In response to the commenter's concerns about pro se parties being
equipped to make requests for accelerated processing, FINRA stated that
it is not aware of any concerns that pro se parties have been unable to
make requests under the current program.\101\ Nevertheless, FINRA
stated that it would update its website to provide guidance to pro se
parties ``regarding the availability of and process for requesting
accelerated processing.'' \102\ In addition, FINRA stated that it would
provide training and guidance to arbitrators on the proposed rule
change, including on ``various ways that arbitrators can expedite
cases.'' \103\
---------------------------------------------------------------------------
\101\ Id.
\102\ Id.
\103\ Id. at 4.
---------------------------------------------------------------------------
2. Commission Findings Regarding the Proposed Rule Changes for
Requesting Accelerated Case Processing
The proposed rule change is reasonably designed to enhance
qualifying parties' ability to meaningfully participate for the
duration of a proceeding so that case outcomes more accurately reflect
the underlying merits. Currently, FINRA offers a program to expedite
arbitration proceedings in its DRS arbitration forum for parties who
have a serious health condition or are at least 65 years old. Under the
current program, DRS staff has discretion to expedite certain case-
related tasks (e.g., the arbitrator selection process) to try to
shorten the overall length of a proceeding. In practice, however, the
current program only marginally shortens the median time for customer
arbitrations to close by award after a hearing. By establishing
shortened, rules-based deadlines for parties and providing guidance to
arbitrators on how quickly they should endeavor to complete a
proceeding, the proposed rule change should help reduce the length of
time for completing eligible proceedings, helping ensure that eligible
parties can meaningfully participate for the duration of the
proceedings so that case outcomes more accurately reflect the
underlying merits. Additionally, arbitrators will retain sufficient
flexibility to accommodate the particular circumstances of each
case.\104\
---------------------------------------------------------------------------
\104\ See Notice at 105131.
---------------------------------------------------------------------------
The proposed rule change reasonably sets the eligibility age for
parties at 70 years or older. FINRA reasonably determined that
individuals who are 70 years of age and older are more likely than
younger individuals to become seriously ill or potentially die before
the outcome of their arbitration proceeding.\105\ As such, they are
less likely to be able to meaningfully participate throughout the
course of a lengthy arbitration proceeding, which could affect the
outcome of their claim regardless of its underlying merits. The data
presented by FINRA show that lowering the eligibility age to 65 years
or older would likely increase the number of parties eligible for
accelerated processing.\106\ Since arbitrators preside over multiple
cases at a time, any further increase in the number of cases eligible
for accelerated processing could unduly impact their ability to comply
with their obligations under the proposed rule change to endeavor to
render an award within 10 months, as well as their ability to timely
render an award in non-accelerated cases, thus affecting the efficiency
of the DRS forum. In addition, as discussed more fully below, the
proposed rule change would permit parties who are younger than 70 to
request accelerated processing. Specifically, parties who would not
qualify for accelerated processing based on their age would still be
eligible to request that their arbitration panel consider their unique
circumstances when scheduling their proceedings.
---------------------------------------------------------------------------
\105\ Id. at 105134 n.54.
\106\ Id. at 105129 n.15; see also FINRA Response Letter at 3.
---------------------------------------------------------------------------
On the other hand, eliminating eligibility for accelerated
processing based on age, or raising the age higher than 70, as one
commenter suggested,\107\ could frustrate FINRA's goal of helping
ensure that older parties can meaningfully participate for the duration
of a proceeding so that case outcomes more accurately reflect the
underlying merits. It is reasonable for FINRA to establish the
eligibility age at 70 years or older, an approach that reasonably
balances the goal of maximizing the pool of parties likely to benefit
from accelerated processing against the potential impact that a larger
number of accelerated proceedings would have on the length of non-
accelerated proceedings and on the efficiency of the DRS forum. And to
the extent adjustments to the criteria for qualification based on age
are warranted, FINRA stated that it will monitor the new program to
make such a determination.
---------------------------------------------------------------------------
\107\ See Cambridge at 2.
---------------------------------------------------------------------------
The proposed rule change also reasonably permits a party
experiencing an eligible health condition to request accelerated
processing of a case by certifying that: (i) they have received a
medical diagnosis and prognosis, and (ii) based on that medical
diagnosis and prognosis, they have a reasonable belief that accelerated
processing of the case is necessary to prevent prejudicing their
interest in the arbitration. Individuals experiencing an eligible
health condition are less likely to be able to meaningfully participate
in a lengthy arbitration proceeding, which could disadvantage them and
affect the outcome of their case. The proposed rule change would help
ensure that parties to an arbitration are able to meaningfully
participate for the duration of the case, and as a result case outcomes
may more accurately reflect the underlying merits.
The proposed rule changes reasonably balance parties' privacy
concerns against the potential for abuse. To request accelerated
processing due to an eligible health condition, a party need only
certify their eligibility, and is not required to disclose the details
of their medical diagnosis or prognosis (e.g., through medical records)
with the certification. In addition, the proposed rule change would
establish that the party's certification shall not alone be sufficient
grounds for either seeking discovery (e.g., compelling production of
information) about the party's medical condition, diagnosis or
prognosis, or allowing questioning at any hearing about the party's
medical condition, diagnosis or prognosis. Moreover, the threat of
potential sanctions under existing FINRA Rules 12212 and 13212 (such as
assessing monetary penalties; making an adverse inference against a
party; assessing forum fees, attorneys' fees, and costs and expenses)
should help deter parties from making false certifications.\108\ In
addition, FINRA stated that it will monitor the new program for
indications that misrepresentations are occurring, as well as to
determine if adjustments to the criteria for
[[Page 41610]]
qualification based on an eligible health condition are warranted.
---------------------------------------------------------------------------
\108\ See supra note 84.
---------------------------------------------------------------------------
Finally, the proposed rule change reasonably permits parties who do
not meet the age or health eligibility requirements to request that the
panel consider other factors, including a party's age and health, when
scheduling hearings and discovery, briefing, and motions deadlines. As
stated above, some ineligible parties may still benefit from
accelerated processing. The proposed rule change would provide
arbitrators with flexibility to determine whether to expedite a party's
proceedings based on the party's particular circumstances. Such
parties' proceedings would not be subject to the shortened, rules-based
deadlines but the proposed rule change would instead give arbitrators
flexibility when scheduling hearings and discovery, briefing, and
motions deadlines. While the proposed rule change may increase the
number of parties whose claims proceed under a form of expedited
proceedings, arbitrators are provided with sufficient flexibility to
extend the case processing times of their concurrent, non-accelerated
arbitrations to meet the shortened deadlines that would apply to their
accelerated arbitrations. \109\ Such flexibility should help ensure
that arbitrators and, as a consequence, the forum, are not overburdened
to such an extent that it undermines FINRA's goal of reducing the
length of certain cases and maintaining the efficiency of the DRS
Forum. Regarding the commenter's concern about pro se parties and
arbitrator training, FINRA stated that it will update its website to
provide guidance to pro se parties regarding the availability of, and
process for, requesting accelerated processing. In addition, FINRA
stated that it will provide training and guidance to arbitrators on the
proposed rule change, including on ways they can help expedite cases.
For these reasons, the proposed rule change is reasonably designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, and, in general, to protect
investors and the public interest.
---------------------------------------------------------------------------
\109\ See FINRA Response Letter at 4, 8 (stating that the
existing provisions of the Codes provide arbitrators with
``sufficient flexibility to modify the proposed shortened deadlines
when necessary''); see also supra notes 45-47.
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B. Determination of Eligibility
As stated above, the proposed rule change would require the
Director to determine if a party's request for accelerated processing
complies with the proposed eligibility requirements. Specifically, 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 for an eligible health condition.\110\ We
received no comments on this proposed rule change.
---------------------------------------------------------------------------
\110\ Proposed Rules 12808(b)(1) and 13808(b)(1).
---------------------------------------------------------------------------
The proposed rule change would reasonably require the Director to
make an objective determination as to whether the requesting party has
met the eligibility requirements for accelerated processing. As stated
above, the health information required to be reported on the
certification is restricted to the minimum amount of information
necessary to permit the Director to identify those individuals with an
eligible health condition. Similarly, the eligibility age requirement
is designed to establish a bright line for eligibility for accelerated
processing. Given the establishment of such objective criteria, the
determination of eligibility should not require any assessment by the
Director regarding the reasonableness of the requesting party's belief
that accelerated processing is necessary. For these reasons, the
proposed rule change is reasonably designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest.
C. Accelerating the Proceedings
As stated above, the proposed rule change would accelerate the
proceedings by shortening the deadlines for the Director to send the
list of potential arbitrators to the parties; providing arbitrators
with guidance on how quickly they should endeavor to complete
arbitration proceedings; and shortening certain other deadlines that
apply to the parties under the Codes.\111\
---------------------------------------------------------------------------
\111\ See Notice at 105130-105131.
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One commenter supported the proposed rule change, emphasizing that
the establishment of shortened case-processing deadlines for older
parties or those parties with an eligible health condition would be
``meritorious and beneficial to the arbitration process.'' \112\
---------------------------------------------------------------------------
\112\ Caruso at 1.
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Another commenter opposed the ``pre-determined, shortened
schedule'' of the accelerated arbitration proceedings because it
``appears overly constrictive and could impact diligent legal
representation.'' \113\ This commenter recommended FINRA ``encourage
parties and arbitrators to work together to determine an appropriate
schedule that considers the unique circumstances of their particular
case,'' and, ``in the absence of an agreement between the parties, the
arbitrators should have the latitude to adjust the deadlines for the
arbitration to accommodate the party with the qualifying medical
condition.'' \114\ Alternatively, if FINRA retains the set schedule,
the commenter suggested ``at least'' modifying the discovery deadlines
because the ``proposed reduction by approximately half of the discovery
deadline unduly burdens the respondents and possibly the claimants as
well.'' \115\
---------------------------------------------------------------------------
\113\ Cambridge at 3. Another commenter stated that the proposed
rule change would do little to address the problem that FINRA
arbitration is becoming more expensive and less fair than courts,
and suggested that FINRA expand the application of FINRA Rule 9280
(Contemptuous Conduct) to FINRA arbitrations to incentivize
litigators to act in good faith. Letter from Daniel Kolber, CEO/
General Counsel, Intellivest Securities, Inc., dated January 3,
2025, at 1, https://www.sec.gov/comments/sr-finra-2024-021/srfinra2024021-553435-1585502.html. In response, FINRA stated that
this comment is outside the scope of the proposed rule change but
noted that to the extent an attorney is engaging in misconduct in
the FINRA arbitration forum, it will make a referral to the
attorney's disciplinary agency. FINRA Response Letter at 9. FINRA
reasonably declined amending the proposed rule change in response,
as the comment is outside the scope of the proposed rule change.
\114\ Id.
\115\ Id.
---------------------------------------------------------------------------
In response, FINRA stated that establishing rules-based, shortened
deadlines is necessary and appropriate to ``meaningfully reduce case
processing times for those parties who may be unable to fully
participate in lengthy arbitration proceedings--a goal that the current
program has been unable to fully achieve.'' \116\ However, FINRA stated
that the existing provisions of the Codes would provide parties and
arbitrators with ``sufficient flexibility to modify the proposed
shortened deadlines when necessary.'' \117\
---------------------------------------------------------------------------
\116\ FINRA Response Letter at 8.
\117\ Id.
---------------------------------------------------------------------------
The proposed rule change to accelerate proceedings by shortening
deadlines and providing guidance to arbitrators is reasonably designed
to enhance qualifying parties' ability to meaningfully participate for
the duration of a proceeding so that case outcomes more accurately
reflect the underlying merits. Under the current program, DRS staff has
discretion to expedite certain case-related tasks (e.g., the arbitrator
selection process) to try to shorten the overall length of a
proceeding. In practice, however, the current program only marginally
shortens the median time for customer arbitrations to close by award
after a hearing. By establishing shortened, rules-based deadlines for
parties and providing guidance to arbitrators on how quickly they
should endeavor to
[[Page 41611]]
complete a proceeding, the proposed rule change should help reduce the
length of time for completing qualifying proceedings, helping ensure
that eligible parties can meaningfully participate for the duration of
the case.
Moreover, as FINRA stated, existing provisions of the Codes would
continue to provide parties and arbitrators with the flexibility to
address the unique facts and circumstances of each case (such as the
complexity of a case or the volume of discovery) and to modify
deadlines as appropriate.\118\ For these reasons, the proposed rule
change is reasonably designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------
\118\ See id.
---------------------------------------------------------------------------
IV. Conclusion
For the reasons set forth above, the Commission finds that the
proposed rule change is consistent with Section 15A(b)(6) of the
Exchange Act, which requires, among other things, that FINRA rules be
designed to prevent fraudulent and manipulative acts and practices,
promote just and equitable principles of trade, and, in general,
protect investors and the public interest.\119\
---------------------------------------------------------------------------
\119\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
It is therefore ordered pursuant to Section 19(b)(2) of the
Exchange Act \120\ that the proposed rule change (SR-FINRA-2024-021),
be, and hereby is, approved.
---------------------------------------------------------------------------
\120\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\121\
---------------------------------------------------------------------------
\121\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Stephanie J. Fouse,
Assistant Secretary.
[FR Doc. 2025-16293 Filed 8-25-25; 8:45 am]
BILLING CODE 8011-01-P