The FINRA Board of Governors last week authorized the FINRA staff to proceed with revising certain arbitration and mediation rules and rule amendments - expungement proceedings. Here's what was approved and related next steps.

For new rule proposals unrelated to arbitration and mediation, go to:   [RULE 12/12/11 Posting, "Conflicts of Interest .."]

1.  Expungement for Persons Not Named as Parties in Arbitration Claims. FINRA proposes new rules to the Customer and Industry Codes of Arbitration Procedure new rules that would permit persons who are the "subject of" allegations of sales practice violations made in arbitration claims, but who are not named as parties to the arbitration, to seek expungement relief by initiating In re expungement proceedings.

The proposed In re proceeding would eliminate the practice of naming public customers or brokerage firms as respondents in claims seeking expungement.  However, unnamed persons would retain the ability to have their firm or former firm seek expungement in the underlying customer arbitration.

The proposal also clarifies that if an associated person is named as a respondent in a customer-initiated arbitration proceeding, that person may seek expungement of customer dispute information only during that customer case, and not later under the In re expungement rule.

Two new documents would be created to facilitate the process:  a Notice of Intent to File an In re Expungement Claim, and a Submission Agreement for In re Expungement Claims. An unnamed person must file a Notice of Intent to alert FINRA that the person is considering filing a claim for expungement relief.  If an unnamed person determines to seek expungement relief, the person must file a Submission Agreement, which would confer jurisdiction on FINRA to arbitrate these types of cases.

2.  Mediator Selection. The staff will propose an amendment to Rule 14107 of the Code of Mediation Procedure, to provide the Director of Mediation with discretion to determine whether parties to a FINRA mediation may select a mediator who is not on FINRA's mediator roster. Currently, the Mediation Code permits parties to select a mediator either from a FINRA-supplied list or from a list or other source of the parties' choosing. 3.  Subpoenas and Orders of Production in Arbitrations. The staff will propose to amend the Customer and Industry Codes of Arbitration Procedure - Rules 12512, 12513, 13512 and 13513 - to standardize FINRA practices relating to arbitrator orders or subpoenas to non-party brokerage firms.  The amendments will provide that a brokerage firm party requesting the appearance of a witness or production of documents, either by subpoena or arbitrator order, would pay the reasonable costs of the appearance and/or production.  The amendments also would codify FINRA's current practice of allowing the non-party to raise objections to subpoenas or orders issued by arbitrators. 4.  Threshold for Simplified Arbitration. The staff will propose to raise the threshold for simplified arbitration from $25,000 to $50,000  - Rules 12800 and 13800 of the Customer and Industry Codes of Arbitration Procedure, respectively.  Under simplified arbitration procedures, claims may be decided on the written submissions of the parties, and no hearing takes place. For further details, go to:   [FINRA Board - December 2011]