Coronavirus: FINRA extends ban on in-person arbitration past Memorial Day

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In a sign that industry regulators and leaders do not soon expect a return to normalcy for wealth management, FINRA is extending its postponement of in-person arbitration hearings through Memorial Day.

The second delay comes as the number of confirmed coronavirus cases soars, firms ask advisors to work remotely, and trade associations cancel conferences.

The regulatory agency says it will contact anyone with a postponed hearing or mediation to discuss rescheduling or possible remote options. The policy change does not affect other case deadlines, according to the regulator.

“We’re doing our best to keep cases moving forward where possible,” Rick Berry, executive vice president and director of dispute resolution at FINRA, tells Financial Planning. Berry emphasized the importance of safeguarding the health of arbitration parties, panels and staff.

FINRA had already postponed hearings scheduled before May 1 to help safeguard arbitrators, plaintiffs and attorneys from exposure to the coronavirus. It was a welcome change in policy among some lawyers though further delays in arbitration cases may leave aggrieved clients and brokers waiting even longer for potential restitution. But while some arbitrations are purely local affairs, others involve travel across the country — potentially putting participants at risk of exposure to the virus.

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March 24

In a similar move, state and federal courts have postponed cases and hearings.

“FINRA is doing the right thing,” says Tom Lewis, an attorney at law firm Stevens & Lee.

Lewis will have to reschedule three cases set to be heard in May. He’s already had five other cases postponed that would have been heard in March and April. Lewis, noting how the pandemic has spread, says he’s not sure any hearings to be held until after July 4.

It’s not clear how many cases are affected by the policy change, but there were 4,756 open cases nationwide as of January, according to FINRA data. The regulator has approximately 7,900 arbitrators.

FINRA said on its website that parties in an arbitration can agree to do virtual hearings. The regulator’s staff use Zoom for video conference calls. The agency has also gone paperless and most of its employees are working remotely.

For his part, Lewis says virtual meetings may be a fine solution for simple cases such as expungement hearings, but not for matters like cross examining witnesses. “It just doesn’t have the same power as an in-person hearing.”

Because many cases could be delayed by several months, parties may be more inclined to reach a settlement, adds Lewis, who is based in Lawrenceville, New Jersey. “If the parties have a settlement in mind, then now is the time to do it because you could be looking at a six-month delay,” Lewis says.

Of course, FINRA isn’t the only organization canceling events scheduled to take place in May. The FPA, NAPFA and the Investments & Wealth Institute called off conferences set for that month. The institute said in a mass email its decision was “in the best interest of the health and safety of our attendees.”

These and other moves have been made in tandem with city and state authorities restricting movement, asking residents to shelter in place and non-essential businesses to close in an effort to stem the rising number of coronavirus cases. There were approximately 60,000 confirmed cases of coronavirus in the U.S. as of March 24, according to a New York Times database.

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Coronavirus Arbitration FINRA Regulatory relief Diseases and conditions Workplace safety and security Rick Berry
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