[ by Howard Haykin ] FINRA proposes to change its Customer and Industry Codes of Arbitration Procedure, relating to subpoenas, and to the authority of arbitrators to direct - without issuing subpoenas - appearances by associated person witnesses and/or the production of documents. When specified industry parties seek the appearance of witnesses or the production of documents from FINRA members (and individuals associated with the members) that are not parties to the arbitration, FINRA arbitrators shall have authority to issue orders for the appearance of witnesses or the production of documents, instead of issuing subpoenas. FINRA also would add procedures for non-parties to object to subpoenas and arbitrator orders of production ("arbitrator orders").  It also would standardize procedures under the Codes relating to:  (i) service of motions for subpoenas and arbitrator orders;  (ii) service of issued subpoenas and arbitrator orders; and,  (iii) time frames for responding to subpoenas and arbitrator orders, making them operationally consistent. Subpoenas Rules 12512 and 13512 ... give arbitrators the authority to issue subpoenas to parties and nonparties, and set forth procedures for a party to request that an arbitrator issue a subpoena, and for serving the subpoena on either a party or non-party to the case.  the motion on each other party.  The Subpoena Rules also detail how a party may object to a subpoena and reply to an objection. Finally, the Subpoena Rules describe how parties must share documents produced under a subpoena.  The Subpoena Rules do not address, however, who bears the costs of production of a subpoena Arbitrator Order Rules 12513 and 13513 ... authorize arbitrators to order FINRA firms, their employees, and/or their associated persons to appear and to produce documents without using the subpoena process. Unlike the Subpoena Rules, the Order Rules expressly address allocation of costs. Proposed Amendments to the Subpoena Rules. FINRA proposes to amend the Subpoena Rules to provide that unless circumstances dictate the need for a subpoena, arbitrators shall not issue subpoenas to non-party FINRA members and/or employees or associated persons of non-party FINRA members at the request of FINRA members and/or employees or associated persons of FINRA members. FINRA further proposes that:

• if the arbitrators determine that the request for the appearance of witnesses or the production of documents should be granted, then the arbitrators should order the appearance of such persons or the production of documents from such persons or nonparty FINRA members under the Order Rules.
• an arbitrator might order a subpoena if - e.g., a firm failed to produce documents pursuant to an arbitrator order, or if a former associated person of a FINRA member has left the industry and the arbitrator believes that an arbitrator order would not be effective.
• it would add new Rules 12512(g) and 13512(g) to address costs when a FINRA member and/or employee or associated person requests a subpoena directed to a non-party FINRA member and/or employee or associated person.  If an arbitrator issues a subpoena, the party requesting the subpoena shall pay the reasonable costs of the non-party’s appearance and/or production, unless the panel directs otherwise.
• it would add new Rules 12512(e) and 13512(e) to provide a mechanism for non-parties to object to a subpoena that an arbitrator issues to them.
• if a non-party receiving a subpoena objects to the scope or propriety of the subpoena, the non-party may, within 10 calendar days of service of the subpoena, file written objections with the Director.  The Director shall forward a copy of the written objections to the arbitrator and all other parties.  The party that requested the subpoena may respond to the objections within 10 calendar days of receipt of the objections.  After considering all objections, the arbitrator responsible for issuing the subpoena shall rule promptly on the objections.  The proposed amendments would codify FINRA’s current practice relating to objections.

Proposed Amendments to the Order Rules. FINRA proposes to incorporate the procedures outlined in the Subpoena Rules for making, objecting to, and serving motions, and which detail how parties must share documents received from non-parties. Finally, FINRA proposes to provide for non-party objections to an arbitrator’s order. The proposed rule change will standardize FINRA’s procedures relating to Arbitrator Orders. Effective Date. FINRA will announce the effective date of the proposed rule change in a Regulatory Notice to be published within 60 days of SEC approval. The effective date will be 30 days following publication of such Regulatory Notice. FINRA Staff Contact. Direct questions about this rule filing to:  Margo Hassan, Assistant Chief Counsel, FINRA-DR;  at (212) 858-4481. For further details, go to:   [FINRA Rule Filing 12-41, 8/24/12].