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

Events

How are broker-dealers helping 401(k) advisers adapt to a changing market?

Bryan Hodgens, co-head of LPL Financial's Retirement Partners group, says the industry is getting much better at connecting advisers to wealth management opportunities and helping scale their businesses.

Latest news & opinion

IBDs with the most CFPs

How many of the more than 83,000 certified financial planners are employed by the big independent broker-dealers?

Richard Thaler wants to use 401(k)s to boost Social Security payments

The Nobel laureate wants to simplify drawing down retirement assets, which he thinks is 'way harder' than saving the money.

InvestmentNews announces 2019 Innovation Awards winners

Sheryl Garrett is this year's InvestmentNews Icon.

Morgan Stanley rides wealth management train to solid first quarter

Chairman and CEO James Gorman expresses excitement about expanding into workplace plans with purchase of Solium.

Fate of New Jersey fiduciary standard could come down to politics, court

With strong support from N.J. Gov. Phil Murphy, the proposal has momentum out of the gate.

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