SEC Grants Accelerated Approval to FINRA’s Proposed Overhaul of its Discovery Guide


The Securities and Exchange Commission (SEC) has granted accelerated approval to the Financial Industry Regulatory Authority’s (FINRA) proposed rule overhauling its Discovery Guide (the Guide). Initially introduced in 1999, the Guide provides guidance to arbitrators and parties regarding discovery obligations during the course of a FINRA arbitration and sets forth lists of documents that are presumptively discoverable by the parties. FINRA originally submitted its proposed revisions to the Guide to the SEC last July and amended its proposed revisions to the Guide in February of this year. The revised Guide as amended can be found here.

The SEC has determined that “good cause exists to approve the proposal, as modified by Amendment No. 1, on an accelerated basis.” SEC Release No. 34-64166 at 21. FINRA has stated that it will convene a Discovery Task Force six months after implementing the revised Discovery Guide “to review substantive issues relating to the Discovery Guide on an ongoing basis, for the purpose of keeping the Discovery Guide current as products change and new discovery issues arise.” Id. at 4 - 5. The new Discovery Guide likely will become effective in May 2011.

Consolidation of Multiple Lists

The most noticeable revision to the Guide is the elimination of multiple claim-specific document lists. The current 14 lists will be consolidated into two lists of documents, one list for the firm and one for the customer, that are, for the most part, discoverable in all cases. To address concerns that parties will be forced to produce documents that have no relevance to the issues raised in their particular case, FINRA emphasizes that arbitrators and parties retain flexibility with respect to the discovery process, and arbitrators have the authority to exclude from production certain documents on the lists. Moreover, as with the current Guide, parties may object to producing documents on the list.

Electronic Files Are “Documents”

Another significant revision to the Guide is the addition of language expressly providing that electronic files are “documents” within the meaning of the Guide. Thus, it is likely that e-mails will be subject to discovery from firms and customers.

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