The difference between “in person” and virtual communications is pretty acute nowadays. For many, online communication has actually become quite vexing from technical, social and psychological perspectives. The difference between “in person” and “virtual” communication is at the heart of a legal action against the United States Financial Industry Regulatory Authority (FINRA).
On November 10, 2020, Alpine Securities Corporation filed a complaint against FINRA at the Utah District Court. The company is unhappy with an order forcing it to use Zoom as a part of disciplinary proceedings.
In August 2019, FINRA’s Department of Enforcement (DOE) instituted a disciplinary proceeding against Alpine, concerning whether the company had charged “unreasonable” or excessive fees. FINRA seeks by that proceeding to expel Alpine from FINRA.
The company notes that it has the right to defend itself in an “in-person” hearing. FINRA Rules state that members are “entitled to be heard in person” to defend themselves against disciplinary charges at an in person hearing held before a Hearing Officer.
Alpine invoked its right to defend itself and proceeded to an in-person hearing that began February 18, 2020 in Salt Lake City, Utah. While FINRA’s DOE was able present six of its witnesses, including its key witness and documentary evidence, Alpine was able to present only one.
The hearing was then adjourned on February 22, 2020 due to an urgent personal matter affecting Alpine’s counsel. The parties then in March, agreed to resume in-person proceedings in late April 2020, but the COVID-19 pandemic rendered that impossible. Since then, in a series of conferences and communications with and among the parties and before the Hearing Officer, the parties repeatedly agreed, with the exception of a few limited witnesses, to resume the Hearing in person at a future date. Most recently, the parties agreed, and the Hearing Officer ordered that the Hearing resume in person on November 30, 2020.
On November 2, 2020, the Office of Hearing Officers Chief Hearing Officer Maureen Delaney ordered that the remainder of the Hearing proceed on November 30, 2020 entirely by virtual means through Zoom videoconferencing. This was purportedly pursuant to a temporary rule amendment FINRA adopted on August 31, 2020 and which took effect October 1, 2020 (the “Zoom Amendment”).
According to Alpine, that order was a “completely generic directive”, devoid of any acknowledgement of the extensive discussions that have occurred on the issue with the Hearing Officer, the nature of the particular proceeding and reasons that a virtual proceeding is not workable or appropriate.
Alpine explains why Zoom videoconferencing is not suitable for the disciplinary proceedings. The Hearing Officer ordered the parties to participate in an off-the-record test run on the Zoom platform, which occurred on June 18, 2020.
The Zoom test run was not without difficulty. During the presentation of documents, for example, the video frame displaying the witness is reduced to a thumb nail, making it difficult if not impossible to view the witness’s reaction and demeanor. The parties also encountered difficulties zooming in on certain aspects of document and using annotation features to draw the witness’s attention to a particular aspect of the document.
The limited remote testimony that was taken was difficult for both parties and witnesses, Alpine stresses. One witness timed-out of the videoconference in the middle of his testimony and the parties had to wait several minutes for him to rejoin, at which point the substantive topic had to be re-explored to ensure no testimony was lost.
Other witnesses could not hear questions or objections, nor could the Hearing Officer or the court reporter, requiring repetitive colloquies that both wasted time and burdened the record.
Because proceeding virtually is unnecessary and contravenes Alpine’s contractual, statutory and constitutional rights, Alpine requests entry of order and judgment declaring the Zoom Amendment invalid, as well as declaring FINRA’s order that Alpine proceed by Zoom invalid.
The company also request that the Court temporarily and/or permanently enjoin FINRA from conducting the remainder of Alpine’s Hearing virtually, enjoin FINRA from proceeding until the Hearing can be conducted in-person, or, alternatively, enjoin FINRA from proceeding with the Hearing until Alpine is given an opportunity to be heard on the issue of whether proceeding virtually is appropriate in this case.