SEC Proposes To Expand Discovery In Administrative Hearings

In response to criticism from banks and investment advisors, the SEC has proposed several rule changes to how it conducts administrative hearings. The proposed changes will do three things. First, they will extend the time between the initiation of the proceeding and the hearing, giving respondents more time to prepare their case. Second, they will allow respondents to take depositions. Third, they will require the parties to use electronic service for the filings of papers.

“The proposed amendments seek to modernize rules of practice for administrative proceedings, including provisions for additional time and prescribed discovery for the parties,” SEC Chairman Mary Jo White said in a statement.

It is interesting, if not particularly surprising, that the SEC has moved so quickly to respond to industry concerns regarding the limited discovery available in these proceedings. Attorneys representing claimants in FINRA arbitrations against banks have complained for years without any success about the limited discovery (including lack of depositions) in those proceedings.

The SEC's proposed rule changes are available here and the SEC's press release discussing those changes are available here.