Consider this not so uncommon set of facts. You represent a company or senior executive in an array of intersecting proceedings in a factually complex securities fraud matter. There is a criminal inquiry, an SEC regulatory or other administrative investigation and numerous civil and class actions in federal and state courts across the country. Your team is hard at work collecting and reviewing documents, responding to demands to turn over information and interviewing witnesses. You are learning the facts in real time, developing theories of defense and in the early stages of hiring experts. As part of the mix, your team is trying to centralize and consolidate all civil actions in one federal district through a combination of removals, stay applications and use of multidistrict litigation procedures.
Then, adding to this organized chaos, your client receives a statement of claim filed in a customer arbitration before the Financial Industry Regulatory Authority (FINRA). You know that most FINRA arbitrations will go to trial within a year, the proceedings are summary in form and the rules of evidence generally are not followed. You are acutely aware that FINRA’s newly adopted rules of procedure have narrowed the grounds on which a respondent may obtain a prehearing dismissal. You also know that FINRA’s streamlined procedures do not permit you to rely on the protections of the Private Securities Litigation Reform Act of 1995. Because this FINRA statement of claim (as most do) seeks recovery under state blue sky law, the federal directives against aiding and abetting liability (Central Bank1), holder actions (Dabit2) and tenuous theories of economic loss (Dura3) and causation (Stoneridge4) may not apply in full force, or at all. Finally, meaningful appellate review is circumscribed under the Federal Arbitration Act (FAA).
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