SEC Approves FINRA's Proposed Amendment to Discovery Guide

Sunday, September 22, 2013

The SEC has approved a proposed rule change (SR-FINRA-2013-024), filed by the Financial Industry Regulatory Authority, Inc., to amend its Discovery Guide used in customer arbitration proceedings. The amendments provide guidance on electronic discovery issues, product cases and clarify the existing provision relating to affirmations made when a party does not produce documents specified in the Discovery Guide.

Under the revisions, the parties must produce electronic files in a "reasonably usable format." When presented with contested motions about the form of document production, arbitrators can evaluate whether a document produced in a given format is consistent with the form in which it is ordinarily maintained. If not, a party must state the reasons.  Arbitrators can also look at whether the other party’s ability to use the document is impaired (i.e. searchability, metadata, etc.). Arbitrators will have the power to order a different format for production if warranted. In conjunction with the guidance on e-discovery, there will also be guidance on the cost or burden of production. FINRA intends to amend the current provision to give arbitrators the discretion to order a different form of production if it would lessen the cost or burden of producing electronic documents.

With regard to affirmations, which are currently provided for when a party indicates there are no responsive documents, the amendments provided that a party must indicate that they performed a good-faith search and indicate the sources searched.

Publication of the rule change is expected in the Federal Register during the week of September 16th. (Release No. 34-70419)

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