After further postponing in-person hearings due to the coronavirus pandemic, FINRA may make video conferences a permanent option for arbitration cases.
“I think Zoom is here to stay in some capacity,” Laura McNamire, regional director of FINRA Dispute Resolution Services, said Oct. 21 during a virtual panel at PIABA’s annual meeting. “It’s something that we would foresee offering as long as people want it,” she added.
Currently, the regulator’s rules neither explicitly permit nor prohibit the use of Zoom in arbitration cases. That ambiguity — and flexibility — is probably here to stay, according to Director of FINRA Dispute Resolution Services Richard Berry, who contrasted it with the in-person requirement of enforcement hearings. “We think the best course of action at this time is to not do rule-writing,” Berry said.
In March, the regulator postponed in-person arbitration hearings on account of the public crisis. Forty-five arbitration cases have had one or more hearings take place via Zoom as of Aug. 31, according to FINRA.
To be sure, in-person hearings have not been banned outright. If all the parties and arbitrators agree, they can meet face-to-face — so long as participants comply with state and local COVID-19 orders, Berry said.
Nevertheless, none have taken place in-person since March, and none will likely take place until January 2021, according to FINRA’s most recent guidance. Even that date may get pushed back given the ongoing public health crisis and rising number of coronavirus cases.
“We will look every single month to try to get things to move forward in person,” Berry said. But, he added a caveat: “I don’t want to sugar coat this. The data is going in the wrong direction.”
The number of arbitration cases is increasing — with a 2% uptick compared to last year, according to August FINRA data. Intra-industry cases were up 43%, although the number of customer cases was down by 19%. The overall turnaround time for cases takes approximately 6% longer than it did in 2019, according to the regulator.
FINRA has strategized a three-part plan for resuming in-person hearings, based on local and federal requirements as well as participants’ willingness. The regulator is meeting with health experts every week to evaluate the situation, according to Berry.
“We do have one particular hearing location that actually looks promising, but we don’t have any hearings there until April,” Berry said, without naming the location. FINRA has a total of 70 arbitration hearing locations across the country.
Doc Kennedy, president of AdvisorLaw and who represents brokers in expungement cases and employer disputes, says he hasn’t minded using video conferences for hearings. However, he would strongly oppose using Zoom for a client’s upcoming disciplinary hearing.
“It’s too high stakes to be done [via video conference],” he says, noting that body language and “how you pace in the room,” can make a difference.
The regulator proposed an amendment in September to permit its disciplinary arm, FINRA’s Office of Hearing Officers, and the National Adjudicatory Council, to conduct hearings by video through the end of December. FINRA responded to two dissenting letters earlier this month. A FINRA spokeswoman says the rule is currently effective.
When asked whether parties could indefinitely postpone an arbitration hearing until it could take place in-person, Berry said the parties would just have to agree. “I would be surprised if a panel was not receptive to that request,” he said.