We reported in SAA 2021-41 (Nov. 4) that the Public Investors Advocate Bar Association (“PIABA”) announced in an October 28 Press Release that Michael Edmiston of Jonathan W. Evans & Associates was elected President at its just-concluded annual meeting. As promised, we interviewed Mr. Edmiston about his priorities for this upcoming year. The Alert congratulates Mr. Edmiston and thanks him for agreeing to answer our questions. We wish him nothing but the best as we head into what promises to be a challenging year on several fronts.
Q: What are PIABA’s top three priorities for the coming year?
A: First, we will focus on unpaid arbitration awards both at FINRA and in the Registered Investment Advisor (“RIA”) space. Investors who are harmed by the misconduct of brokers or RIAs should have a meaningful opportunity to recover their losses.
Second, we will continue to work to understand the arbitration issues in the RIA space. In addition to the unpaid awards issue, we will focus on arbitrator disclosures, forum rules, and fees, and disclosure of awards. We plan to work with both the SEC and NASAA to resolve the problems.
Finally, we plan to work with the SEC to improve the Form CRS disclosures. For example, the forms should include information material to investors including information about the financial responsibility of firms and what dispute resolution mechanism may apply.
Q: Several bills have been introduced in Congress to curb mandatory predispute arbitration agreement use in the consumer and employment areas – including financial services. Do you think any of these bills have a chance at enactment?
A: The use of forced arbitration clauses in the consumer, employment, and financial services areas is inappropriate. Forced arbitration is risk management to keep aberrant behavior hidden from public scrutiny, prevent vindication of civil rights, and reduce the size of any damages awarded. Forced arbitration stunts the development of case law, effectively freezing the law at the point where forced arbitration was implemented. As the public becomes more aware of the unfairness forced arbitration works on individuals and society, the more likely a bill will pass. Given the absence of a majority in the Senate, it seems unlikely that any of the bills will pass. However, we will continue to work with legislators to ensure they understand the issues faced by investors when subject to mandatory arbitration clauses.
Q: In your October 28 formal statement on assuming the PIABA presidency, you say: “Arbitration has its place in the dispute resolution continuum. But for investor-RIA disputes, arbitration needs to be at the election and option of the investor, not the RIA.” Care to elaborate?
A: Arbitration is a proven dispute resolution tool. When used properly between consenting, sophisticated parties, it helps resolve disputes, preserve relationships and returns the parties to business. When a sophisticated party with greater resources perverts arbitration into a shield from disputes or uses it to hide misconduct, it hurts our society.
RIAs are fiduciaries to their clients. They are obligated to put their clients’ interests first. It makes no sense that an RIA would take away a client’s constitutional right to a jury trial or use the cost of arbitration to stop a client from bringing a dispute and still believe it has put its clients’ interests first. If an RIA consents to dispute resolution in the forum of the client’s choice, the RIA is doing what is best for the client. If a client, with informed consent, chooses arbitration after the dispute arises, they should be able to proceed in that forum and should not need to receive the consent of the firm.
Q: The COVID-19 pandemic caused lots of changes in the ADR world, including at FINRA. Besides forever getting rid of the middle seat in coach, what’s the one change you’d like to see continue?
A: FINRA has developed processes for proceeding with hearings online and continues to improve the process. For those investors who want their case to proceed virtually, I hope that FINRA provides that opportunity, while making every effort to fully resume in-person hearings. Additionally, I appreciate the flexibility that virtual platforms provide for mediations. I expect to see more cases appropriately proceeding with virtual mediations in the future.
Q: Rumor has it that at one point in your career, you worked at NASD/FINRA. If so, can you tell us more about that?
A: The rumor is true. While at Pepperdine University School of Law in 1997, I interned at the NASD Office of Dispute Resolution “NASD-ODR” in Los Angeles. Rick Berry was my boss. From the start, Rick had me working with parties, calling counsel, sitting in on hearings, and drafting arbitration awards. It combined my finance, legal, and ADR education and experience and gave me the opportunity to meet all the players in the securities arbitration community. I will always be grateful for that initial experience.
After the bar exam, I returned to NASD-ODR. Rick was a major influence on my early career. Learning from him how to identify interests and thoughtfully work with parties, counsel, arbitrators, staff, administrators, and others to address and solve problems have been invaluable skills.
You [George Friedman] also influenced me early in my career. Shortly after you came to the NASD in 1999, you, Rick, and I met the morning of an arbitrator training to discuss arbitrator recruitment and training in Southern California. I prepared a presentation about our office’s efforts, and was primed to give you what I anticipated would be a fabulous presentation. When the time came, I could not find the papers. You remained graciously patient while I fumbled through my briefcase. Preparing for any meeting, hearing, or trial, I still recall that humbling morning and organize accordingly. Not too long ago, the shoe was on the other foot with a younger attorney, and I remembered your kindness and smiled while waiting.
The experiences and relationships I’ve made along the way give me a unique perspective on securities arbitration which I use to serve our clients and PIABA. It is almost 25 years ago, to the day, I met Rick, and I’m excited to be in a place where our shared experiences will allow us to collaborate and find creative solutions to further improve securities arbitration.
Q: Is there anything else you’d like to share with our readers?
A: FINRA has steadily developed its forum into the premier securities arbitration provider and continues to make improvements. Every forum has its flaws, but in its current form and without forced arbitration clauses, I would be comfortable advising clients to consider the FINRA forum. If FINRA leads from the front and voluntarily fixes the unpaid awards problem in the broker-dealer space, I think securities arbitration would blossom from where it is today.
(ed: *We’re happy to see the RIA issues as front and center, something we’ve been advocating for a while. **Again, our thanks to Mr. Edmiston for sharing his time and views with the Alert.)