Skip to main content

Confidential Financial Information of Non-Party Customers Placed at Risk When Litigants Subpoena FINRA Enforcement Files

An increasingly common tactic among claimants’ lawyers in Financial Industry Regulatory Authority (FINRA) arbitrations is to issue subpoenas to securities regulators, including FINRA itself, calling for the production of investigative files. This is accomplished by asking the arbitration panel to issue a subpoena pursuant to FINRA Rule 12512 (or Rule 13512 in an employee versus firm case). The respondent firm typically opposes the issuance of such a subpoena on a number of grounds, including the fact that securities regulators have much broader investigative powers than do private litigants and often demand and collect large amounts of personal confidential information (PCI) about customers and employees who may not be parties to the arbitration in which the subpoena is sought. 

Despite these objections, arbitration chairs have on occasion issued such subpoenas, sometimes with a proviso directing FINRA to redact any PCI pertaining to individuals who are not involved in the arbitration. However, FINRA has taken the position that while it will produce its files in response to an arbitration subpoena it will not redact PCI from those files due to the burden and expense such redaction entails. This has resulted in claimants and their counsel receiving significant amounts of PCI belonging to individuals who are not parties to the case. Such information may include full names, physical addresses, telephone numbers, email addresses, dates of birth, social security numbers, account numbers, account holdings, statements of net worth, beneficiary information, and other potentially valuable data. This article outlines the problem and offers some suggestions to remediate its effects. 

Continue reading via the View Media link.