Tuesday, July 13, 2010


On June 30, 2010, a Massachusetts state court overturned a gag order imposed by a FINRA arbitration panel that required an entire arbitration proceeding, including all testimony, documents and hearing transcripts, to remain strictly confidential. The claimant in that proceeding, a former Oppenheimer & Co. branch manager, James F. Dever, said the gag order effectively prohibited him from trying to clear his record after the arbitration proceeding. Judge Frances A. McIntyre of the Suffolk Superior Court in Boston overturned the FINRA panel’s broad-reaching order of secrecy, holding that it offended public policy and violated the First Amendment by restricting free speech. Judge McIntyre’s decision made clear that courts will review and overturn confidentiality orders that unlawfully restrict parties’ constitutional rights.

The decision will likely have important ramifications for customers and financial institutions within the investment industry. Arbitration agreements are standard in the investment industry, and arbitration forums such as FINRA generally require arbitrators to protect the confidentiality sought by the parties. In most instances, customers and financial institutions enjoy the confidentiality of arbitration proceedings. However, the parties do not always wish to remain silent about the nature of the proceedings. Judge McIntyre’s June 30th holding suggests that under the First Amendment, arbitrators cannot cloak arbitration proceedings with secrecy by forcing the parties to remain silent about the proceedings.

In order to protect their clients’ rights, attorneys handling financial industry lawsuits must be familiar with the intricacies of the arbitration process, whether it be through FINRA, JAMS, AAA or some other arbitration forum. Cosgrove Law, LLC has extensive experience in the arbitration process and regularly represents investors in arbitral forums.

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