Can An Out-Of-State Lawyer Participate In Indiana FINRA Actions?

All states have laws about the unauthorized practice of law, including Indiana. These laws prevent those without a law license issued from the state of Indiana from representing individuals legal matters in this state, with some exceptions allowed for temporary admission for those with out of state licenses based on certain guidelines. However, with the rise of alternative dispute resolution, including arbitration with the Financial Industry Regulatory Authority (FINRA), many people have questioned whether out of state investment fraud lawyers can participate in these actions held in Indiana, or whether that would be considered the unauthorized practice of law.

FINRA itself has no position on this issue. [link: http://www.finra.org/ArbitrationMediation/Parties/ArbitrationProcess/NoticesToParties/p015666] It has stated, “Each state has the right to determine whether representation by an out-of-state attorney in FINRA’s forum violates the state’s unauthorized practice of law provisions. FINRA has no rule on out-of-state practice, so any attorney practice issues must be addressed to the appropriate jurisdiction for resolution.”

Since FINRA has placed the ball back in Indiana’s court to determine if such practice is allowed or not, we next looked at what Indiana has to say about the unauthorized practice of law. Indiana began to address this issue when it adopted its Rule of Professional Conduct 5.5, regarding the unauthorized and multijurisidictional practice of law. This rule states in section (c) that “A lawyer admitted in another United States jurisdiction . . . may provide legal services on a temporary basis in this jurisdiction that: (3) are in or reasonably related to a pending or potential arbitration . . . in this or another jurisdiction, if the services arise out of or are reasonably related to the lawyer’s practice in a jurisdiction in which the lawyer is admitted to practice and are not services for which the forum requires pro hac vice admission.” Comment 12 to this rule further explains that “The lawyer . . . must obtain admission pro hac vice in the case of a court-annexed arbitration or mediation or otherwise if court rules or law so require.”

FINRA actions are not court-annexed arbitration, and therefore we have to dig deeper to determine if Indiana’s court rules require pro hac vice admission in these circumstances. It is Indiana Rules for Admission to the Bar and the Discipline of Attorneys, Rule 3, section 2, which allows for admission of attorneys on a temporary basis by petition in certain circumstances. Specifically, Rule 3(2)(a) states: “The Supreme Court, the Court of Appeals, the Tax Court, or a trial court, in the exercise of discretion, may permit a member of the bar of another state . . . to appear in any particular proceeding, only if the court before which the attorney wishes to appear determines that there is good cause for such appearance and that each of the following conditions is met . . .” The problem with this language is that it obviously does not contemplate arbitrations, such as before FINRA, where attorneys would not be appearing before a court itself, but instead before a private organization of arbitrators agreed upon by the parties in a contract.

Therefore, it appears to be an open question at this time whether Indiana rules require pro hac vice admission of out of state attorneys before participation in FINRA actions. A review of the annotations of these rules does not reveal any decisions about this issue which prove instructional. It should be noted, however, that whenever Indiana does require pro hac admission for out of state attorneys, it also requires a member of the bar of Indiana to appear, and to agree to act as co-counsel. See Indiana Rules for Admission 3(2)(a)(2). Therefore, it would be prudent for out-of-state attorneys to hire experienced co-counsel for Indiana based FINRA actions, and apply for pro hac vice status in compliance with Rule 3 of the Indiana Rules for Admission to avoid later charges of the unauthorized practice of law.

Further, the requirement in Professional Rule of Conduct Rule 5.5 that the services must “arise out of or are reasonably related to the lawyer’s practice in a jurisdiction in which the lawyer is admitted to practice” suggests that some type of nexus is required between the Indiana action and the foreign lawyer’s own practice. If such a nexus is weak or non-existent it is even more critical for foreign lawyers to turn over the case to an experienced Indiana attorney for these FINRA actions. Not only will it serve the client better, since FINRA rules and regulations can be daunting for those not familiar with them, but also to avoid violating Indiana laws regarding unauthorized practice.