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Secretly Recording FINRA Arbitration

Samuels Yoelin Kantor LLP

Faced with proof that FINRA arbitration hearings have been secretly recorded at least three times, FINRA is making an official policy against the practice. These complaints came from the Securities Experts’ Roundtable Inc., a group of expert witnesses, who had their expert testimony leaked outside the hearing rooms.

Of course we agree that recordings should not be made secretly. It raises obvious ethical problems but practical dangers too. Such as the possibility that one side has an unnamed co-counsel stashed in a hotel room somewhere.

That said, it’s worth clarifying that all FINRA hearings are digitally recorded anyway. Parties have the right to bring court reporters into the hearing. Any party should be permitted to make any recording of the process that it wants, so long as everybody knows they are doing it.

FINRA’s official instructions to arbitrators includes this language:

There must be a record kept of every FINRA arbitration hearing. This is an important function, and is required under FINRA rules. It is essential that care be taken to properly record each hearing, and to timely transmit the digital recorder and memory cards to FINRA Dispute Resolution.

Occasionally, the parties request a stenographic record. In such cases, the arbitrator can determine that the stenographic record will be the official record and dispense with the recording of the hearing. If a stenographic record is used, the parties are required to defray the cost of such record and provide FINRA Dispute Resolution with sufficient copies of the transcript for FINRA and the arbitrators.

…There are no “off the record” conversations between the parties and yourself. Record the entire proceeding!

The news of the secret recordings comes from Dan Jamieson, writing in Investment News.

(The complete article can be found here.)

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