Turn off that recorder: Finra says arbitration hearings off limits

Expert witness group complains of secretly recorded proceedings

Nov 27, 2012 @ 3:21 pm

By Dan Jamieson

The Financial Industry Regulatory Authority Inc. plans to warn parties in its arbitration hearings against using electronic devices to secretly record and transmit the proceedings.

The warning was sparked by complaints from the Securities Experts' Roundtable Inc., a group of expert witnesses, about several instances of “electronic eavesdropping” where witnesses were surreptitiously recorded and their testimony apparently made available to others outside the hearing rooms.

In a September letter to Finra, the Roundtable described three instances in which its members had encountered eavesdropping.

The group asked Finra to create policies and issue guidance about the practice.

“It's a private forum,” Jeffrey Schaff, president of the Roundtable and founder of Ardor Fiduciary Services Ltd. in Northfield, Ill., said in an interview. “It's a controlled forum [where] people sign in, sign out and there are some facts [presented] that some witnesses are not allowed to hear.”

In its letter, the Roundtable also noted that allowing outsiders to view a hearing could give one of the parties the ability to benefit from the assistance of unnamed co-counsel.

Finra told Mr. Schaff in a letter this month that the regulator would be “educating our [arbitrators] about this concern” in an upcoming article in its “Neutral Corner” newsletter for arbitrators and mediators.

The article should be out by the March issue, Finra spokeswoman Michelle Ong wrote in an email.

“Anything that would give an unfair advantage to one side would not be allowed” by arbitrators, Ms. Ong said. In its letter, Finra also said it will consider changes to the opening script that arbitrators use to “alert parties to the importance of seeking approval of the other participants and the arbitrators before attempting to transmit or record the proceedings.”

Mr. Schaff said he welcomed Finra's response.

“When you're at hearing, you're not paying attention to what the parties are doing with their electronic devices,” he said.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Surprises when reporting on Morningstar

Assistant managing editor Susan Kelly speaks with senior columnist John Waggoner about the interesting discoveries he found in speaking with the analytics giant.

Latest news & opinion

Focus Financial IPO could be a sell signal for RIAs

The $100 million stock offering will fine-tune RIA valuations.

Focus Financial files for an IPO valued at $100 million

The RIA aggregator, founded by CEO Ruediger 'Rudy' Adolf (above), has partnered with more than 50 registered investment adviser firms.

Piwowar defends SEC's best-interest rule

SEC commissioner says the Department of Labor rule set up an 'unworkable, impossible set of standards for people to comply with.'

RIA in a Box acquired by private equity firm Aquiline Capital

New owners plan more growth for the software service provider.

IBDs with the most female reps

Here are the 10 independent-broker dealers that have the most female reps.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print