Mr. Malloy Case Summary

I. Mr. Malloy Had a Duty to Disclose His Relationship to Mr. Dial The Smythes contractually agreed to settle any disputes regarding the accounts they had with Providence using arbitration, specifically following the standards of the FINRA. (AA:4) FINRA requires certain disclosures prior to appointing arbitrators. First the parties must give potential arbitrators information about the nature of the dispute, and identify the parties. (FINRA Rule 12405(a)) Then each potential arbitrator must make a reasonable effort to “learn of, and must disclose…any circumstances which might preclude the arbitrator from rendering an objective and impartial determination.” (FINRA Rule 12405(a)) This includes any relationship or circumstances involving members of the arbitrator’s family. (FINRA Rule 12405(a)(3)) In addition to disclosing potential conflicts the arbitrator’s obligation to disclose relationships, or circumstances that might preclude him from rendering an objective and impartial determination is a continuing duty once discovered. (FINRA Rule 12405(b)) The California Court of Appeal found that an

Malloy’s relationship with Mr. Dial would clearly meet the standard of relationships to disclose under FINRA. This is the perfect example of what the justice and judge were speaking of in Commonwealth and Johnston. This is the type of relationship that on its face shows there is a need for disclosure. Mr. Malloy’s relationship with his stepson is much more intricate than the acquaintances who occasionally refer cases in Johnston. First it is a parental relationship, which implicates much more of a bias than a mere business acquaintance. Second, Mr. Malloy was involved in the conflict between Mr. Dial and Martins Lydel and Ms. Shaw. Mr. Dial had confided in Mr. Malloy about his conflict with Martins Lydel. Mr. Malloy was aware that Martins Lydel had fired his stepson and was assisting him in at least getting his “U-5” reclassified if not a potential