FINRA Discovery Guide

Discovery and the means to obtain relevant evidence in arbitration is very important.  It is so important because it one of the only basis for seeking to vacate or upset an arbitration award (based upon the panel's refusal to hear pertinent evidence) and it is so important because often the securities industry goes to great lengths to conceal or hide pertient evidence.

Accordingly, in November 1999, FINRA, then the NASD adopted a specific Discovery Guide setting forth those documents and information that are discoverable in customer cases.

Generally, depending on the issues in any particular case, customers were expected to produce certain documents, including all written communications between them and their broker, all documents relating to any other securities accounts, together with their tax returns for a period of at three years before they opened their account. Customers were also expected to provide detailed information relating to their business interests, education, and financial condition.

Among other things, brokerage firms were and are expected to produce all documents relating to your account, including new account forms, customer statements, confirmations, and communications between you and your broker. Records of complaints or disciplinary action against your broker should also be made available together with information and documents relating to the brokerage firm's supervision of your individual broker, the broker's training, and the brokers basis of compensation should also be produced by the brokerage firm in most cases.

In connection with the recommendation of any particular security, the broker or brokerage firm also ought to be obligated to produce documents relating to the basis of any such recommendation.

The Discovery Guide, however, within the last 10 years was attempted to be amended at least three times.  The securities industry, understandably, has sought to limit its scope with respect to the documents that it has to produce and increase the burden on customers, requiring the production of documents relating to almost every aspect of their personal financial life.

While the Discovery Guide, which was expected to decrease the controversies surrounding discovery, is "guide," for use in customer cases and is "not intended to remove flexibility from Arbitrators or the parties in a given case." Executive Summary at 1, often the securities industry objects to the production of documents and information contemplated by the Guide, but then argues that the documents customers are contemplated to produce, must be produced in every case.