Galvin Legal challenged FINRA Overreach and Forced a Rule Change on Hearing Record Access. At Galvin Legal, PLLC, we are committed to ensuring fairness for registered representatives within the FINRA dispute resolution system. A critical aspect of this commitment involves holding FINRA accountable to its own rules and the law. A notable example of this was our firm’s persistent advocacy in the 2023 matter of Joseph C. Bowden v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (FINRA Case No. 22-02238). This case exposed FINRA’s willingness to operate outside its established rules, attempting to provide a confidential hearing recording to a non-party, and ultimately, due to our challenge, led to a necessary FINRA rule change.
The Bowden case starkly illustrated how FINRA’s actions can disregard the rights of registered representatives. FINRA staff sought to provide a confidential expungement hearing recording to the customer involved—a non-party to the arbitration—despite the complete absence of any FINRA rule or legal precedent authorizing such a disclosure. This move threatened the due process and confidentiality rights fundamental to a fair proceeding for the registered representative.
FINRA’s Attempt to Sidestep Its Own Rules in Bowden v. Merrill Lynch
In March 2023, following a final expungement hearing for our client, FINRA staff declared their intention to release the audio recording of this confidential proceeding to the customer. This was a clear overreach. As Galvin Legal immediately objected, FINRA’s rules at the time (specifically Rule 12606 and its industry counterpart, Rule 13606) unequivocally stated that only a party to the arbitration was entitled to a copy of the hearing recording. FINRA’s proposed action was not only unsupported by its existing rulebook but was in direct contravention of it.
Our firm’s Initial Letter of Objection (March 25, 2023) laid bare this fundamental challenge to FINRA’s attempt to act without, and against, its own regulations.
Galvin Legal Fights Back: Escalating the Challenge to FINRA’s Chief Legal Officer
Galvin Legal refused to accept FINRA’s arbitrary stance, which jeopardized the registered representative’s rights. We vigorously contested this unauthorized action through numerous filings, including a Response to FINRA’s Stance (March 28, 2023), a Fifth Amended Motion for Reconsideration, a supporting Legal Brief, and an Addendum to the Motion.
Our arguments were clear and legally grounded:
- No Rule Allowed It: FINRA Rule 13606(a)(1) strictly limited record provision to “parties.”
- Violation of Confidentiality: FINRA was ignoring the sanctity of arbitration confidentiality, a principle upheld by the U.S. Supreme Court (e.g., Hall Street Associates, L.L.C. v. Mattel, Inc.).
- Ignoring Legal Precedent: The proposed action flew in the face of established state (e.g., Florida’s Federated Dep’t Stores, Inc. v. Adams) and federal law (FAA case law like Schmitz v. Zilveti) protecting confidential arbitration information from non-participants.
When FINRA persisted, Galvin Legal escalated the fight, taking our client’s case directly to the highest levels of FINRA’s legal department, including the Chief Legal Officer. We demanded that any decision to bypass existing rules and legal protections be justified at the very top, as detailed in our Letter Regarding the Pending Decision (April 1, 2023). Throughout this, we also, consistent with the actual rules, formally requested the hearing recording for our client, the party entitled to it.
FINRA Forced to Change Its Tune: Regulatory Notice 24-15
As a direct result of this unwavering challenge to its unlawful position, FINRA issued Regulatory Notice 24-15 in November 2024. This notice announced amendments to Rule 13606, effective for arbitration cases filed on or after December 1, 2024.
The amended rule now explicitly permits the Director of FINRA Dispute Resolution Services to provide a copy of the official record of an expungement hearing “to any customers, upon request, who attend and participate in the expungement hearing, or who provide their position on the expungement request in writing.“
The Outcome: Accountability and a Clearer Path Forward
The events in the Bowden case and the subsequent rule change are a powerful illustration of how vital it is to challenge regulatory overreach. FINRA initially attempted to operate outside the bounds of its own rules and established law. It was only through Galvin Legal’s determined fight that this was brought to a halt, compelling FINRA to address the deficiency in its rules.
This outcome underscores the necessity for registered representatives to have fierce, knowledgeable legal advocates who will not back down when faced with procedural injustice. Galvin Legal, PLLC, is proud to have stood firm for our client, resulting in a rule change that, while now providing a defined mechanism, came about because FINRA was forced to confront the illegitimacy of its prior stance. We continue our steadfast commitment to ensuring FINRA adheres to its rules and the principles of due process for all registered representatives.
Disclaimer: This blog post is for informational purposes only and does not constitute legal advice. The outcome of any legal matter depends on its specific facts and applicable law.
