FINRA recently issued Regulatory Notice 24-16, announcing amendments to the applicability of the Document Production Lists for simplified customer arbitrations under Rule 12800. These changes, effective March 3, 2025, introduce greater flexibility for customers while clarifying the rules surrounding discovery in such proceedings. Simplified customer arbitrations are designed for disputes involving $50,000 or less, excluding interest and expenses. Under Rule 12800, these cases can proceed in one of three ways:
- Paper Cases: No hearing is requested, and the arbitrator decides based on submitted materials.
- Option One - Regular Hearings: Full pre-hearing and hearing procedures apply.
- Option Two - Special Proceedings: Abbreviated hearings with streamlined processes.
Historically, the Document Production Lists applied only to regular hearings. Customers in paper cases or special proceedings had no presumptively discoverable documents and had to rely on direct requests.
Key Amendments
Under the amendments:
-
Optional Application of Document Production
Lists:
- In paper cases and special proceedings, customers can now opt to apply the Document Production Lists by explicitly requesting this when filing arbitration or responding by the answer due date.
- If no such request is made, the arbitrator retains discretion to use portions of the lists as deemed appropriate.
- Clarification for Regular Hearings
- Rule 12800 now explicitly states that the Document Production Lists apply to arbitrations in which a customer requests a regular hearing (Option One).
- Maintaining Flexibility:
- Even without the Document Production Lists, parties can still voluntarily exchange documents or request discovery under the expedited framework.
Practical Implications
These changes empower customers by allowing them to determine the scope of discovery in their simplified arbitrations. Customers seeking the benefits of presumptively discoverable documents in streamlined proceedings can now opt-in, potentially reducing discovery disputes and improving efficiency.
For regular hearings, the amendments codify existing practices, ensuring clarity for all participants. However, parties should remain mindful of intercompany transaction eliminations and accurate expense categorization when preparing consolidated trial balances for filing.
Conclusion
The amendments to Rule 12800 provide a welcome layer of flexibility while retaining the expedited nature of simplified arbitrations. As these changes take effect in March 2025, parties should familiarize themselves with the revised discovery procedures and consider their strategic implications. When in doubt, consultation with experienced legal counsel can ensure compliance and optimal outcomes in the arbitration process.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
