Securities and Exchange Commission Approves Improvements To The NASD’s Code of Arbitration Procedure

The SEC (Securities and Exchange Commission) says that it has approved a number of improvements made by the National Association of Securities Dealers to their Code of Arbitration Procedure. The newly approved Code describes best practices and offers additional guidance to arbitrators and parties regarding the NASD Dispute Resolution forum.

Included among these changes are the reorganization of the Code into a more user friendly and logical manner, and the simplifying of the Code’s language. The Code is also now divided into three sections: The Industry Code, The Customer Code, and the Mediation Code. This separation of the code into three parts is intended to remove any confusion regarding which part applies to which disputes. The rules are now ordered in the sequence of a typical arbitration to make each rule easier to find. In addition, parties involved in disputes must either produce documents requested during the discovery process or formally object to producing them. Uniform procedures for filing, responding to, and making decision regarding motions in arbitrations can also be found in the new Code.

While the Mediation Code became effective on January 20, 2006, the Industry and Customer Codes won’t become effective until April 2007. These new Codes will affect claims that are filed on or after the April 2007 date, claims that have already been filed but do not already have a list of arbitrators, and claims where a new list of arbitrators still needs to be generated.

NASD DR President Linda Fienberg says the changes are intended to make the dispute resolution process as “transparent, fair, and efficient for investors and others who use the forum.”

In addition, the Code includes a new roster of public arbitrators who are qualified to serve as chairpersons in investor-related cases. In cases requiring three arbitrators, the parties involved will be given three lists, each with eight names of potential arbitrators: a public chair-qualified arbitrator list, a public arbitrator list, and a non-public arbitrator list. The parties involved will be able to cross out four names from each list and rank the other names in order of preference. In cases requiring a single arbitrator-usually the claims in these type of cases are no more than $50,000-the parties involved will be able to choose from a list of public chair-qualified arbitrators. For arbitrations between industry players only, there will be a non-public chairperson list for these types of disputes.

Lists of arbitrators from the NASD roster will be selected randomly by its new MATRICS (Mediation and Arbitration Tracking Retrieval Interactive Case System) technology platform. This is intended to give all qualified arbitrators an opportunity to be on an arbitration list.

The three codes are available online at the NASD’s web site.

Shepherd Smith Edwards & Kantas LTD LLP has represented thousands of clients across the United States who have been the victims of commission churning, misrepresentations, unauthorized transactions, unsuitable investments, excessive mark-ups, botched transfers, and other issues involving investor fraud. To schedule a free consultation with one of our attorneys, contact Shepherd Smith Edwards & Kantas LTD LLP today.

Related Web Resource:

Code of Arbitration Procedure, Finra
Securities and Exchange Commission