FINRA proposes to allow non-party witnesses to bring their lawyers.

It has happened to me many times. A client calls me to advise that they have been ordered to appear as a witness in an arbitration proceeding. It is not their fight, or at least they are not named. Inevitably they ask “Can you come with me?”

In the past, the answer was “I can go, but the arbitrators may not even allow me in the room.” Some arbitrators would allow an attorney to be present, but he or she would not be allowed to say anything other than his or her name “for the record.” Other times, an attorney would be allowed to intervene when it appeared that the testimony was being used for other than the stated purpose.

FINRA now seeks to formalize attorney representation of non-parties as witnesses. FINRA has proposed a rule that would permit attorneys to be in the room. Their ability to participate would still be determined by the panel, but at least the attorney would be in the room. That would give some comfort to the witness.

Where this will be meaningful is when a lawyer is using the testimony of the non-party witness to obtain information for other purposes or other cases. The attorney would be able to intervene and advise the panel of the objection to the use of the arbitration forum as a substitute for a deposition. The attorney, rather than the witness, could defend the witness’ objection to a line of questioning.

The proposed rule change refers to keeping “due process” in mind. Sometimes that concept seems to be missing from arbitration. In this situation, it appears that FINRA has it right.

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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