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Will the New FINRA Discovery Guide Create More Problems Than It Solves?

The SEC is soliciting public comments on proposed amendments to the FINRA Discovery Guide (the “Guide”) governing customer arbitration proceedings. The revisions are designed to bring some flexibility into such discovery and streamline the arbitration process.

FINRA has proposed amending the introduction to the Guide to state that parties are encouraged to discuss and agree upon the form of production. Similar to Federal Rule of Civil Procedure 34, parties would be required to produce electronic files in a “reasonably usable format,” meaning “the format in which a party ordinarily maintains a document, or to a converted format that does not make it more difficult or burdensome for the requesting party to use during a proceeding.”

FINRA proposes that production in a “reasonably usable format” can be achieved by tailoring the document production to the needs of each case. Where the form of production is contested, the proposal suggests arbitrators resolve disputes considering the totality of the circumstances, including the following factors:

  • For documents in a party’s possession or custody, whether the chosen form of production is different from the form in which a document is ordinarily maintained;
  • For documents that must be obtained from a third party (because they are not in a party’s possession or custody), whether the chosen form of production is different from the form in which the third party provided it; and
  • For documents converted from their original format, a party’s reasons for choosing a particular form of production; how the documents may have been affected by the conversion to a new format; and whether the requesting party’s ability to use the documents is diminished by any change in the documents’ appearance, searchability, metadata, or maneuverability.

The proposed amendments also reflect a focus on the need for proportional discovery. To help parties conduct e-discovery cost-effectively, the revised introduction provides that arbitrators may order a different form of production if it would lessen the cost or burden of producing electronic documents.

The proposed revisions seem to be an attempt to foster cooperation, encourage proportionality, and improve efficiency — an effort that mirrors the revisions proposed by the Advisory Committee on Rules of Civil Procedure, rules adopted by other agencies, and the local rules of a number of federal and state courts. However, it seems that FINRA may need to supplement the Discovery Guide with additional detail, particularly for weighing the cost of e-discovery against its burden, lest the revisions serve to promote rather than limit discovery disputes and render arbitration no more efficient than litigation.

Gabriela P. Baron is senior Vice President of Business Development at Conduent. She can be reached at

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