However, there is a fourth function of securities experts. Ever since 1987, due to a United States Supreme Court ruling, investors have been required to arbitrate their claims, as opposed to taking them to court. Behind the private, closed-doors of arbitration, securities experts do more than assist the trier of fact with respect to the three areas mentioned above. They additionally serve as assistants to the lawyers in the case. Arbitration rules allow experts to stay in the hearing room throughout the arbitration. This is a major benefit, because in court, the expert is disallowed from being in the courtroom when other witnesses testify. There, though, the expert has the benefit of pre-trial fact finding procedures such as depositions, interrogatories, and other types of discovery. In a court case, lawyers are able to gather a large percentage of the testimony and facts prior to the trial or hearing. They then prepare their case with that information and funnel the information to their testifying expert.
Not so in arbitration where pre-trial discovery avenues are unavailable or severely limited. Although this is a tremendous cost saving for the client, it means that much of the "discovery" in the case actually occurs during the arbitration while the witnesses are testifying! The expert can play a critical role in assisting the lawyer in interpreting what can sometimes be complicated securities issues that arise during witness testimony. In addition, the expert can comment on the testimony of witnesses and form opinions based on what has transpired during the arbitration.
An arbitrator in a securities arbitration is a fairly unique individual, because he or she is both the judge and the jury. The arbitration process can far too often be somewhat unstructured and at its worst, a guessing game. Wherein in the courtroom, the rules and regulations as to testimony and documents is extremely regulated, in arbitration, the rules are less formal and left up to the discretion of the arbitration panel. Therefore, arbitration panels hold significant power over not only individual rulings, but the progression of the entire arbitration. There have been some abuses in the past, but with the new arbitrator selection process that was implemented in late 1998, the environment for a full and fair hearing has improved significantly. The vast majority of the arbitrators for the NASD and the New York Stock Exchange are intelligent, diligent, well meaning, and fair individuals. But still, going through the arbitration selection process is an extremely important function for the lawyer and the expert to work through together (see Mr. Schulz's article on the new arbitrator selection process). This is a process that an expert and particularly Mr. Schulz intimately familiar with.
The above factors makes the securities expert, except in the smallest of cases, a critical component.
