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Comment Letter Opposing FINRA 18-22 (Discovery of Insurance Information in Arbitration)

(Spacing is off online, but was correct when submitted)


Jennifer Piorko Mitchell

Office of the Corporate Secretary


1735 K Street, NW

Washington, DC 20006-1506

RE: Regulatory Notice 18-22: Discovery of Insurance Information in Arbitration

Dear Ms. Piorko Mitchell,

Regulatory Notice 18-22 requests comments on a proposed amendment to the Discovery Guide’s Firm/Associated Persons Document Production List to require firms and associated persons, upon request, to produce documents concerning third-party insurance coverage in a customer arbitration proceeding. Responding as a small firm member of FINRA, I oppose this proposed amendment.

The argument for adoption of this proposed amendment rests squarely, as expressed in a dozen or more plaintiff attorney comment letters, on the fact that disclosure of liability insurance coverage has been part of the Federal Rules of Civil Procedure for decades and, as such, should be further mandated in the FINRA Code. There is however a significant and meaningful problem with that argument and that is we find a notable lack of correlation between the federal court system and the FINRA Arbitration Program that is the forum mandated for member firms and their associated persons.

It is an indisputable fact that FINRA members and associated persons do not enjoy the same Constitutional protections that other Americans do under the federal rules of civil procedure and federal rules of evidence found in the federal court system. For instance, the protections for defendants of litigation to have a case decided by a jury of their peers, the bifurcation of court proceedings dealing with liability and sanctions (v. liability and sanctions heard in ONE proceeding at FINRA), the ability to subpoena witnesses and documents in court (which we cannot do in a FINRA arbitration unless the parties to be subpoenaed are associated with a FINRA member), or to have the ability to exclude evidence traditionally believed to be unreliable, such as hearsay; none of these federal protections are afforded to FINRA member firms or their associated persons. Also, the right to move cases from the FIRNA arbitration system to federal courts is impermissible for FINRA member firms and/or their associated persons.

Further, unlike the federal court system, FINRA does not have an appeal process through which a party may challenge an award. This means that all awards rendered under the FINRA Codes are final and are not subject to review or appeal, except under very limited circumstances; the bottom line is FINRA does not hear appeals on arbitration awards. In small firms’ collective experience, it takes a virtual act of Congress to have an arbitration award appeal granted. Keeping in mind, too, that even clear mistakes of law or fact will not necessarily justify an arbitration award being overturned. This is the significance of the term “binding” in binding arbitration and provides my concern for small firm rights, specifically when small firms are dealing with potentially less than reputable plaintiff attorneys who initiate meritless actions and file vexatious litigation that is so costly and harmful to small businesses.

It is vital that we seek to strike the right balance to ensure that defendants’ rights to due process remain intact while preserving protections for customers. Providing plaintiff attorneys a home field advantage by which the architecting of the most financially damaging claim is certainly a reasonable possibility, when counsel KNOWS these small businesses cannot afford to avail themselves of a robust defense against these at times frivolous claims, does not advance fair and equitable due process for defendants.

Finally, there will be a commercial consequence to member firms of all sizes, but especially small firms because we cannot afford to self-insure ourselves, when insurance companies drastically raise their premiums in response to the effect of a rule amendment like this passing. Twenty small firms are, on average, going out of business each month and I would argue that it is incumbent upon all of to seriously consider the increased cost burden on small firms should this amendment pass.

Our economy is powered by small business. Our future job growth depends on small businesses. Our future economic prosperity and competitiveness depends on the ability of our small businesses to innovate and grow into industry leaders. As someone who has owned and operated small businesses for the majority of my career, it is hard to see how due process of a small firm defendant is protected by this proposed amendment and I therefore submit this comment letter in opposition to 18-22 and request that FINRA and its board also reject this proposal.

** Having been a small firm member for over three decades, I know that time is the most precious resource for the women and men who run small broker-dealers. There are times when we may disagree with rule proposals or rule amendment proposals, either in whole or in part, and while in a perfect world we would avail ourselves of the opportunity to be heard during the comment period, the reality is (as FINRA and the SEC well know) we simply do not have the time to write and submit comment letters. Taking care of our employees, customers, overall business, regulatory obligations, and more, all reasonably and responsibly come before writing a comment letter.

Regarding Reg Notice 18-22, I shared a draft of this letter with some small firms and as most do not have the bandwidth to write their own but wish to express their strong opposition to this proposal nonetheless, they have asked instead to add their names to my letter. In doing so, we respectfully request that FINRA not minimize our combined effort into a single submission, but rather understand and acknowledge that this Comment Letter is submitted with the intention to represent, in the form of a substitute, 77 Comment Letters from 77 small broker-dealer executives and their associated firms.

We thank you for the opportunity to comment on this proposed amendment.



Paige W. Pierce

SVP, Larimer Capital Corp

President, Paige Pierce Consulting

George C. Reichle, President A.P. Securities Inc.

John Parmigiani, CEO & President Allied Millenial Partners, LLC

Clarence Yee, President American Investors Company

Elton Johnson, Jr., President Amerivet Securities, Inc.

Mike Petagna, President Amuni Financial

Larry H. Weinberg, COO/CCO Amur Advisors LLC

Juan D. Espinosa, CEO/CFO/CCO Apto Partners, LLC

Robert E. Hillard, President Arlington Securities, Inc.

Roberto Santos, CEO/CCO Arrowroot Partners, LLC

Craig Fischer Atlantic Securities, Inc.

Robert Aufhauser, President & CEO Aufhauser Securities Inc.

Robert J. Onesti, President Bowne Park Capital, Inc.

Carol Ann Kinzer, Partner Brokerage Consulting Group, LLC

Randy Burch, President Burch & Company, Inc.

Lester Hochler, CCO Cape Securities, Inc.

Randall L. Hansen, President Centennial Securities Company

Stephanie N. Elliott, President & CEO Chapin Davis, Inc.

John Pisapia, President Chelsea Financial Services

Neville Golvala, CEO ChoiceTrade

D. Bruce Church, President Church Gregory Adams Securities Corp.

Charles Reiling, CEO Coastal Equities

Stephen Nasser, President Coit Capital Securities, LLC

John Frontero, President Cross Point Capital

Cary Elliot Meth, CCO Dawson James Securities, Inc.

Raymond A. Thompson, SVP/CCO/COO Dorsey & Company

Kim Schmidt, COO Elmcore Group, Inc.

Felix Danciu, President Elmcore Group, Inc.

Robert L. Hamman, President First Asset Financial Inc.

Bruce Williamson, VP/CFO/CCO/COO Fortress Group, Inc.

Eric Flesche, CCO Glendale Securities, Inc.

George Castillo, President Glendale Securities, Inc.

Roderick R. Scribner, President & CEO Gramercy Securities, Inc.

Dave Mullen, President & CCO Hazard & Siegel, Inc.

Deborah M. Higgins, President Higgins Capital Management, Inc.

Greg Taunt, Partner IASG Alternatives LLC

Scott Hayes, President & CEO Institutional Securities Corporation

David Haddock, President Investment Architects, Inc.

Gil Mogavero, Managing Director/CCO JMP Securities LLC

Robert L. Kaplon, President Kenneth Jerome & Co., Inc.

Larry M. Kohn, CEO L.M. Kohn & Company

Wendy Lanton, CCO Lantern Investments, Inc.

Mary Ellen Williams, CFO/CCO Lieblong & Associates, Inc.

Jessica Pastorino, President & CCO M&A Securities Group, Inc.

Bradley C. McCurtain, President Maine Securities Corporation

Daniel Dooley, CEO & President Maplewood Investment Advisors, Inc.

Shawn P. McLaughlin, President & CEO McLaughlin Ryder Investments, Inc.

Morris Midkiff, President Midkiff & Stone Capital Group, Inc.

Mark Rogers, President & CEO N4 Financial, Inc.

Gary K. Ching, VP/CFO NPB Financial Group, LLC

Neal E. Nakagiri, President & CEO NPB Financial Group, LLC

Robert L. Snider, President OmniCap, LLC

Steven A. Segal, President & CEO Park City Capital, Inc.

Thomas B. Jahncke, SVP Passco Capital, Inc.

Eduardo Tovar, VP Private Portfolio, Inc.

Joel H. Ravitz, Chairman & CEO Quincy Cass Associates, Inc.

Robert Randolph, CCO R.M. Duncan Securities, Inc.

Ramon Dominguez, CEO RD Capital Group, Inc.

Donald J. Feldmann, President/CEO/CCO Rippe & Kingston Capital Advisors

Robert L. Lohwater, CCO Sage Rutty & Company

Wayne F. Holly, President Sage Rutty & Company

Howard Feigenbaum, Owner Sharemaster

Jonathan Hodson-Walker, Managing Partner Silverwood Partners

James Alger, President Simmons First Investment Group, Inc.

Francesco Matteini, CCO Sixteen Securities, Inc.

Rick Dahl, EVP/CCO Sorrento Pacific Financial, LLC

Jonathan H. Black, President Southeast Investments NC, Inc.

Robert Keenan, President St. Bernard Financial Services, Inc.

Stephen A. Kohn, President Stephen A. Kohn & Associates, Ltd.

William C. Hoover, President & CEO Steward Securities Group, LLC

Jeff A. Joslin, Senior Advisor Stock Traders

Joseph Michael Burke, CEO Strategic Capital Investments, LLC

William R. Sykes, President Sykes Financial Services, LLC

David V. Shields, CEO Wellington Shields & Co, LLC

Daniel Pisenti Whitehall-Parker Securities, Inc.

Robert Loo, President Whitehall-Parker Securities, Inc.

David Iannini, President William & Henry Associates

Tina B. Maloney, Chairman Winslow, Evans & Crocker, Inc.

Paige Pierce