In a FINRA Arbitration Statement of Claim filed on the cheery date of Christmas Eve, December 24, 2010, public customer Claimant Henig asserted $14,000 in damages arising from phone transaction failure. In the Matter of the FINRA Arbitration Between Marc Henig, Claimant, vs. E*Trade Securities, LLC, Respondent (FINRA Arbitration 11-00013, October 16, 2012).
Respondent E*Trade generally denied the allegations and asserted various affirmative defenses.
At the October 3, 2012, hearing Respondent E*Trade argued that based on FINRA's "Time Limits" Rule 12206(a) of the Code of Arbitration Procedure that the matter should be dismissed.
SIDE BAR: In relevant part, Rule 12206 states:
(a) Time Limitation on Submission of Claims
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. The panel will resolve any questions regarding the eligibility of a claim under this rule.
In granting Respondent's motion and dismissing the case without prejudice, the sole FINRA Arbitrator noted that the trades at issue occurred on November 24, 2004 (the day before Thanksgiving) but the Statement of Claim was only first filed in December 2010; consequently, the case was deemed ineligible for FINRA arbitration because more than six years had elapsed from the cited event and the date Claimant filed his Statement of Claim.
FINRA's Rule 12206 (also known as the "Eligibility Rule") provides 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. The determination of whether FINRA's Eligibility Rule applies is left for the FINRA Arbitration Panel. The six-year eligibility rule is not a statute of limitations and not subject to tolling; and the period runs from the date of the transaction giving rise to the claim, not from the date of discovery of the alleged claims.
Sadly, the set-up for this case was an interesting one - many online customers complain about telephone and computer problems that result in unintended orders or fail to process orders that were supposedly transmitted for execution. Although many of these complaints prove to be "operator error" arising on the customer's side of the transaction, there are many situations where the firm's telephone or computer system is the culprit. It would have been nice to have learned more about the dispute involving the now somewhat old-fashioned telephone means of order entry but, alas, Rip Van Winkle appears to have arisen from his slumber too late.
For similar fact patterns, READ these "Street Sweeper" columns: