New Rules and Procedures
New FINRA Rules Limit Motions to Dismiss in Arbitration
Thursday, February 12th, 2009 | New Rules and Procedures | No Comments
The Securities and Exchange Commission (“SEC”) has approved new rules to the Financial Industry Regulatory Authority (“FINRA”) Code of Arbitration Procedure, which severely limits a party’s right to file a motion to dismiss during arbitration. The new rules address investors concerns about abusive filings of dispositive motions by limiting the circumstances under which a FINRA arbitration panel can grant a pre-hearing motion to dismiss. In particular, the new rules prohibit a pre-hearing dismissal unless the arbitration panel finds: (1) that the parties have settled their dispute in writing; (2) that the moving party was not involved with the account, security or conduct at issue; or (3) the claim was not filed within six years of the events at issue. In addition to narrowing the grounds on which an arbitration panel can grant a motion to dismiss, the new rules also permits the following:
- The prohibition of a party’s ability to re-file a denied motion to dismiss without an explicit order from the panel;
- The issuance of sanctions for bad faith motions to dismiss; and
- The authority to award costs and attorneys’ fees to the opposing party if it is determined that the moving party’s motion to dismiss was frivolous.
The new rules should apply equally to employment arbitration to ensure that like investors, employees will have the opportunity to argue their case in employment arbitration.