FINRA Arbitration Eligibility Motions - Ken Strongman, Esq.

A FINRA Arbitration provides several motions to dismiss. A motion to dismiss based on eligibility grounds is a request made to the panel by a party. It is made prior to or after the conclusion of the case-in-chief. It can eliminate some or all claims raised by the party filing a claim.

FINRA Rule 12206(b) Eligibility Motions

A respondent may file a motion to dismiss a case because of eligibility under FINRA Rule 12206, which states that no claim shall be eligible for submission to arbitration under the Code where six years have elapsed from the occurrence or event giving rise to the claim.

In addition to stating that the full panel will resolve any questions regarding eligibility of a claim, FINRA Rule 12206 also contains the following procedural requirements:

A party must file an eligibility motion in writing, separately from the answer, and only after filing the answer.
A party must file the motion at least 90 days before a hearing, and the other parties have 30 days to respond. Any reply must be made within five days of receipt of a response.
FINRA staff will forward the eligibility motion and all response papers to the full panel for review.
If a party files a motion to dismiss on multiple grounds, including eligibility, the panel must decide eligibility first.
Before granting a motion under this rule, the panel must hold a hearing on the record.
If the panel grants an eligibility motion, the decision must be unanimous, and must be accompanied by a written explanation.
If the panel determines that a claim was filed after the six-year eligibility cut-off and grants the eligibility motion, it cannot rule on any other grounds for dismissal.

The panel determines whether a claim meets the six-year eligibility requirement by reviewing the submissions, pleadings and arguments of the parties. When appropriate, the panel may give the parties a reasonable opportunity to conduct discovery. As with any discovery request, arbitrators have discretion to grant, deny or modify the request. If the arbitrators have additional questions about the eligibility of the claim, they should ask the parties to brief the issue. The arbitrators may find that there is a continuing occurrence or event giving rise to the dispute. For example, although a customer purchased stock 10 years ago, there are allegations of ongoing fraud starting with the purchase, but continuing to a date within six years of the date the claim was filed.

If the panel dismisses a claim on the grounds of eligibility, the non-moving party may withdraw any remaining related claims without prejudice and may pursue all claims, including the dismissed claim, in court. Before dismissing a claim, however, the arbitrators should carefully consider each party’s positions in their moving, response and reply papers and oral arguments, and must hold a hearing on the record. If the panel reaches a unanimous decision to grant the eligibility motion, it should inform FINRA of its ruling promptly and provide a written decision.

About the Author: Ken Strongman (www.kpstrongman.com) has years of experience and a growing national reputation as a mediator and arbitrator. He has successfully resolved more than a thousand disputes in the fields of construction defects, real estate, intellectual property, and employment. He is also a Mediator and Arbitrator for FINRA.