Dispute Resolution The Newsletter for Conflict Resolution Neutals and Attorneys Published by the Dispute Resolution Section of the Tennessee Bar Association, October 2001 CONTENTS • ARBITRATION CLAUSES – IN THE AFTERGLOW OF CIRCUIT CITY STORES — by Joe Manuel • ANOTHER CIRCUIT CITY CASE • SPANISH-SPEAKING MEDIATORS • "MEDIATION: A PATH BACK FOR THE LOST LAWYER" – Book Review • FAMILY MEDIATION NEWS – Recommended Articles • USING DIVORCE MEDIATION — A NEW GUIDE FOR CLIENTS — Book Review • RULE 31 AMENDED • DIFFERENCES BETWEEN LITIGATION AND NASD/NYSE ARBITRATION — by Shepherd Tate • SECURITIES INDUSTRY ARBITRATION: DIFFERENCES IN RULES AND PROCEDURES OF THE NYSE AND NASD — by Robert S. Clemente EDITOR'S NOTE For the major article on Securities Industry Arbitration, I am thankful to Shepherd Tate for bringing it to our attention and for contributing his chart on Selected Differences Between Litigation and NASD/NYSE Arbitration. Special thanks go to Mr. Clemente, Director of Arbitration for the NYSE, for permitting the use of his thorough analysis. Note that his article may not be redistributed without his prior consent. I’m thankful to Joe Manuel for the following contribution. Joe, a/k/a The ADR Professor, practices law in Chattanooga and frequently serves as an Arbitrator and Mediator in employment matters. Click www.tennadr.com for his ADR web site. Click www.lawyerslearn.com for his On Line CLE courses on Mediation and Employment Arbitration. Ken Jackson, newsletter editor Neal & Harwell PLC, 150 Fourth Avenue, North, Nashville, TN 37219 Tel. 615-244-1713 Fax 615-726-0573 Email: kjackson@nealharwell.com Unless otherwise noted, this Newsletter may be freely redistributed. We request an acknowledgement that "This Newsletter [Article] was previously published in the Dispute Resolution Section's [Month and Year of Publication] Newsletter. Reprinted with permission of the Tennessee Bar Association." Contributions of articles, comments, and suggestions are solicited. ARBITRATION CLAUSES — IN THE AFTERGLOW OF CIRCUIT CITY STORES By Joe E. Manuel, Esquire Now that the frontal assault upon mandatory employment arbitration clauses has been rebuffed by the United States Supreme Court (Circuit City Stores v. Adams, 121 S.Ct. 1302), the opponents of such clauses will initiate pinpoint attacks upon the features of a particular arbitration clause or the procedure for conducting the arbitration. See, Floss v. Ryan’s Family Steak Houses, 211 F. 3d 306 (6th Cir. 2000). Thus, the issue will become not whether the arbitration clause is enforceable in theory, but rather whether this particular clause is enforceable. Indeed, some courts appear to reap sadistic joy in stating that arbitration clauses in general are enforceable, but holding not this particular one. At least one recent Tennessee case has suggested that requiring the employee to pay the initial filing fee of the arbitration renders the arbitration clause unenforceable. Robert Mayrand v. Mortgage Investors Corp., Memo. Op., Docket No. CV-99-2953 DV (W. D. Tenn) (May 31, 2000). The Sixth Circuit held an arbitration provision unenforceable because the actual rules of administration of the arbitration were too vague and gave the arbitration entity unfettered discretion in the administration of the arbitration. Floss v. Ryan’s Family Steak Houses, 211 F. 3d 306 (6th Cir. 2000). The U. S. Supreme Court has also noted that if the cost is so expensive that it effectively chills the exercise of the employee’s rights then it could render the arbitration requirement unenforceable. Green Tree Financial Corp. v. Randolph, 212 S. Ct. 513 (2000). One potential source of attack in Tennessee is whether a particular arbitration clause is an unenforceable contract of "adhesion". Even though the U.S. Arbitration Act (FAA) has preemptive effect, there is arguably some narrow ground upon which a state might refuse to enforce the arbitration clause if the contract containing the arbitration provision violated the state’s prohibition against adhesion contracts. 9 USC § 2 (" .. . . save upon such grounds as exist at law or in equity for the revocation of any contract"). Frizzell Constr. Co., Inc. v. Gatlinburg, LLC, 9 S.W.3d 79 (Tenn. 1999) (wherein Justice Barker discusses the limited, preemptive effect of the FAA and ultimately holds that although the arbitration clause itself is enforceable, the issue of fraud in the inducement of the underlying contract was for the court rather than the arbitrator based upon the application of Tennessee law.) Mandatory arbitration agreements requiring the employee to arbitrate statutorily protected claims are, in effect, contracts of adhesion under the classic definition. Buraczynski v. Eyring, 919 S.W. 2d 314 (1996). The application is a form standard document and the applicant has no bargaining ability with the employer. The applicant’s options are to: (1) refuse to execute the agreement and give up the job opportunity (or perhaps continuing employment; or (2) execute the agreement in return for consideration for potential employment or continued employment. Even though the adhesion contract argument did not deter the Gilmer Court (Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed. 2d 26 (1991) and its progeny, there may still be fertile ground to plow regarding Tennessee’s view of adhesion contracts. The Tennessee Supreme Court extensively discusses the concept of a contract of adhesion in the context of an arbitration clause that required the patient to agree to arbitrate any claim of medical negligence rather than filing a lawsuit against the physician. Buraczynski v. Eyring, 919 S.W. 2d 314 (Tenn. 1996). The Plaintiff (patient) of a physician was faced with the choice - - - either sign the arbitration clause or seek treatment from another physician. The Supreme Court upheld the arbitration clause even though it found that it was a "contract of adhesion" and discussed at length the distinction between enforceable and un-enforceable adhesion contracts. The factors identified by the Court that convinced it to enforce the arbitration clause have been characterized as the "Buraczynski Test". See, Manuel, Tenn. ADR Handbook § 7-44, (The Harrison Co. 1997 w 1999 Supp.). The Buraczynski factors serve as a useful yardstick to evaluate the validity of any arbitration clause, to wit: 1. Is it a contract of adhesion? 2. If so, are the terms unconscionable or oppressive such as to render them unenforceable? 3. Is the arbitration clause hidden in the midst of a standard admission contract or is it in a separate document? 4. Does the arbitration procedure give an unfair advantage (such as limiting arbitrators to physicians specializing in obstetrics)? 5. Is the arbitration clause conspicuous and does it advise that by its execution, the patient gives up the right to a trial by a court or jury? 6. Is there a period of time wherein the patient can revoke the arbitration agreement? 7. Does the arbitration provision attempt to reduce the duty of care owed by the physician to the patient, limit liability for the breach of duty of care, or does it only shift the forum for the resolution of any dispute? It is significant that Buraczynski addressed an arbitration clause and its interaction with the Tennessee Medical Malpractice Statute of 1975. The Tennessee Supreme Court essentially applied a Gilmer analysis and held that precluding the plaintiff from access to the judicial system (i.e., jury trial) did not deprive the plaintiff of the benefit of the Medical Malpractice Statute, but merely changed the "forum". Accordingly, the arbitration clause did not deprive the patient of her substantive rights under the Medical Malpractice Act. The "Buraczynski Test" does not lend itself to a literal translation to the employment arbitration arena, but it may prove valuable as a checklist for employers and a road map to possible weak spots in an arbitration clause for employees. Accordingly, the Professor suggests that it is worth "dusting off" the "Buraczynski Test" and considering whether a particular Employee Dispute Resolution Plan with mandatory arbitration would pass its muster. Or, does it have the characteristics of an unenforceable contract of adhesion ? ANOTHER CIRCUIT CITY CASE In Gannon v. Circuit City Stores, Inc., ___ F. 3d ____, 2001 WL 930550, 2001 U. S. App. LEXIS 18713 (8th Cir. 8/17/2001) No. 00-3243 reversed a District Court decision that the inclusion of an invalid clause that limited punitive damages to $5,000 rendered an entire employment arbitration agreement unenforceable. The Circuit City agreement specifically provided for severance of any provision held to be in conflict with a mandatory provision of applicable law. The appellate court found also that irrespective of the provision, Missouri law provided for severance. Gannon had argued that this clause fell within the exception that prohibits severance when there is some all-pervading vice or an unlawful act condemned by public policy or common law. She claimed that employers would be emboldened to include improper terms because employees would be forced either to arbitrate under the unfair terms or to go to court to get them removed from the agreement. Such behavior needs to be discouraged, she said, by holding the entire agreement unenforceable. [Look at Hooters of America, Inc. v. Phillips, 173 F.3d 933, 940 (4th Cir. 1999) which had so many biased rules it created a sham system.] The 8th Circuit in this case said it did not have the authority under the Federal Arbitration Act to consider the public policy advantages and disadvantages resulting from enforcement of an arbitration agreement. It disagreed with the Eleventh Circuit’s decision, to the extent it relied on public policy arguments, in Perez v. Globe Airport. Sec. Serv., Inc., 233 F. 3d 1280, 1286-1287 (11th Cir. 2001). In that case there was no severance provision. Iowa Southern District Judge Vietor, sitting by designation, dissented. He thought it unconscionable to nearly eradicate substantive recovery rights ($300,000 punitive damages limit under Title VII, unlimited under Missouri Human Rights Act), fail to inform employees of that fact, and quoted the Perez court’s decision that an arbitration agreement containing provisions that defeat a federal statute’s remedial purpose is not enforceable. He disagreed with the majority’s concern that if they held the entire agreement unenforceable every time a particular clause was determined invalid, it would discourage parties from forming contracts under the FAA. Judge Vietor would distinguish only those clauses that gut a major substantive remedy. SPANISH-SPEAKING MEDIATORS In response to the September newsletter asking for information on those who could mediate or arbitrate in a foreign language, Luis C. Bustamante has informed us that he is fluent in Spanish and can serve as a mediator without the assistance of a translator. I noticed in the ADRC’s directory of Rule 31 Mediators that he is a listed Rule 31 civil mediator. The following is his contact information: Luis C. Bustamante Woolf, McClane, Bright, Allen & Carpenter PLLC 900 Riverview Tower 900 S. Gay Street Knoxville, TN 37902 Phone: 865-215-1000 Fax: 865-215-1001 In Nashville, Ana Escobar in our firm has partially completed her Rule 31 mediation training and has assisted me in mediation as a co-mediator and by providing translations for Spanish-speaking clients. Contact information: Ana L. Escobar Neal & Harwell PLC 150 Fourth Avenue, North Nashville, TN 37219 Phone: 615-244-1713 Fax: 615-726-0573 Anyone else? BOOK REVIEW "MEDIATION: A PATH BACK FOR THE LOST LAWYER" By John R. Van Winkle (Published by the Section of Dispute Resolution, Senior Lawyers Division (2001). Paper, 128 pages. $35. ($24.99 for members of the Section of Dispute Resolution or Senior Lawyers Division). Reviewed by Ken Jackson. The former Chair of the ABA’s Section of Dispute Resolution, John R. Van Winkle, is a former trial lawyer in Indiana who became a full-time mediator and promoter of mediation. His slender volume is useful for an attorney starting from ground zero who wants to understand generally what mediation is about, how to become a trained mediator, and how to start a mediation practice. One chapter is devoted to a standard model for the mediation process, and his experience and approach shows through. Particularly valuable are his insights into the convening process and in dealing with problems that arise during the mediation. He places rather more emphasis on private sessions than I would, stating ". . . the parties invariably separate into private sessions or caucuses." Yet his use of risk analysis in private sessions prior to the exchange of offers has much to commend it in money cases, although more information would be helpful, e.g., a reference to John Cooley’s "Fair Settlement Value" in his book, The Mediator’s Handbook, (NITA, 2000), BATNA/WATNA, or details of risk analysis, range of probable outcome and the like. Only two appendices are provided: a standard engagement letter and a mediation agreement form. Elements are missing in my view. For example, in the engagement letter, there is not a request to be notified if special accommodations are required for any person to participate. I send along the Mediation Agreement form so that the attorneys can review it before the mediation in case they have any problems with its terms. I also go into more detail about the conference statement, and provide a brochure about mediation that the attorneys can provide to their clients. The mediation agreement also has missing elements, e.g., a statement that the mediator is subject to Federal and State ethical rules and a more particularized confidentiality clause. In my view, the author’s aim would be better served with more text in place of the appendices. For example, he could have expanded on his argument to "Get It in Writing" or "Avoiding Impasse" or "Ethical Considerations." With his emphasis on private sessions, the topic of mediator ethics is crucial to an appreciation of the role of the mediator. Van Winkle’s litigation background is evident throughout. He believes the best mediators are experienced trial lawyers. While some of us would agree with that in some cases, it’s far from a blanket truth. As I understand him, he believes the key value of mediation is remedy-tailoring. Each of us might argue for our own ideas of which values are central, e.g., trust-building. He discusses the value-added of mediation to settlement discussions between opposing attorneys, but does not get to the heart of the matter. Former ABA President Jerome Shestack in a stirring introduction which warrants broad circulation remarks that the work is "blessedly without footnotes." There I must disagree. For a short treatment of a complex subject, references to other sources, such as, in this context, Prof. Baruch-Bush’s article on the value-added of mediation would be valuable. "What Do We Need a Mediator For?": Mediation’s ‘Value-Added’ for Negotiators", 12 Ohio St. J. on Disp. Resol. 1 (1996). While the book has a detailed list of sections in the principal two chapters (Emergence of ADR and Mediation and The Mediation Process), there is no index. "Never give up" is the watchword for Van Winkle as he profiles the effective mediator for litigated matters. Another is: "Don’t interfere with the trial process." Again, he promotes the experienced, successful litigator as the model for an effective mediator. One can respect his views based on his professional origins, but I come away with the impression that he has not had much contact with effective mediators who come from other legal and other professional backgrounds. In telling his story about his "conversion" and setting up his firm of three-mediators, I reacted to what I perceived as self-promotion. Undoubtedly, he meant to give a concrete example that would be easier to understand, but I felt it was out of place for an ABA publication. All that said, I enjoyed reading the book for its imagery, particularly that of the "Litigation Train" that goes only where the tracks lead. Van Winkle’s practical examples are instructive for developing options to meet interests. Also useful are his form of the mediator’s opening statement, and his ideas about how counsel should approach their statements in joint sessions. While mediation advocacy is orthogonal to the theme of the book, it is here that those who serve as advocates in mediation settings could gain valuable knowledge. Here’s the rub. At $35 (or even $24.99 for Dispute Resolution Section or Senior Lawyer Division members), this book is too expensive for prospective or new mediators. For whatever set of reasons, I consider that the ABA prices it publications too high. For inexperienced mediators, Cooley’s Mediator’s Handbook at $54.95 and Mediation Advocacy at $40.95 are better values in my view, each having about three times as many pages and more practical content. I wish that topical sections of Van Winkle’s book could be provided as stand-alone pieces in Just Resolutions, the Dispute Resolution Section’s periodical. That would be a valuable benefit for Section members, old and new, and enjoyable reading for all. FAMILY MEDIATION NEWS – SUMMER 2001 This publication of the Association for Conflict Resolution’s (ACR) family section is one of the values of membership in ACR. In the latest issue, for example, here are a few of the items I liked. Chip Rose’s article, Creative Solutions: Riskin and His Pesky Grid, counsels mediators to be more patient in helping the parties to reach a resolution if they value a facilitative style. He admits, as I think many of us would, that when he viewed a video of a role-play of himself, he found that he was being very directive when he thought he was developing process. "It is incredibly easy," he says, "to become distracted, impatient, lazy, tired, or frustrated, and begin to drift along Riskin’s Grid away from your intended approach and into another style . . .. " I’ve had a few cases recently where the parties or attorneys wanted to skip over process. One technique I employed was to make the process more transparent, particularly in the desirability of obtaining more information, reducing mutual uncertainty (i.e., increasing trust), and in evaluating possible solutions. The results were positive in that the parties reached complete agreement having satisfactorily answered Grayfred Gray’s tests: · How does the solution specifically help to solve the problems? · What problems might arise out of the solution? · How does the solution affect other persons? Robert Benjamin’s article, Peripheral Visions: Gut Instinct – A Mediator Prepares, challenges intellectualized analysis such as mine above. Having served in an adolescent psychiatric facility in the "snake pit" days, he had to figure out what worked and what didn’t and develop instincts and use his own intuition in negotiating and managing conflict. He cites Donald Schön’s Educating the Reflective Practitioner for the proposition that the best professional practitioners in any field come to appreciate the value of "tacit knowing, hunches and intuitive understanding." To that I would add Lang and Taylor’s The Making of a Mediator: Developing Artistry in Practice. "Intuition," they say, "is the synthesis of theory with knowledge gained in the interaction that guides the mediator’s behavior. . ." Intuition is "grounded in perceptiveness, empathy with clients, and the ability to understand and appreciate the potential of the situation." Benjamin advocates "crazy wisdom," by which he means incongruous, paradoxical and instinctual thinking. I think that "wild and crazy ideas" have their place in mediation. In one case I proffered something in those terms, and the parties united in their unanimous rejection. What happened then was that the parties were able to agree upon their own, more traditional resolution they had been rather far apart on before my Steve Martin bit. Another item worthy of your attention is Evelyn Lim Ang’s viewpoint on Cultural Diversity Training. She is skeptical of such training, believing that it perpetuates stereotypes. She says that "each individual embodies a culture . . . which may or may not have a strong connection to ethnicity or race," and urges mediators to focus on the individual and the family system at hand. For clients going into divorce, Dr. Donald Saposnek reviews and highly recommends Attorney-Mediator Katherine Stoner’s Using Divorce Mediation: Save Your Money and Your Sanity. Though published by Nolo Press, she’s an attorney, mediator, and professor who apparently can dispense practical wisdom with facility. I’ll give you my take on it below. Meanwhile, you can find some blurbs from the experts at www.nolopress.com. BOOK REVIEW A NEW GUIDE FOR CLIENTS KATHERINE STONER’S USING DIVORCE MEDIATION (NOLO Press, 2001. Paper, approx. 250 pages. $29.95) If I were to reprint only the Table of Contents of each chapter, you would get an idea of how practical and readable this book is for the lay person. She explains the emotional, social, financial and legal aspects of divorce; the contested and uncontested divorces; and uses case examples. For example, in walking through a typical mediation she uses "Robert and Fran" as a prototypical couple. Ms. Stoner runs into some difficulties in Chapter 3, I feel, with a self-test as to whether or not you are ready to mediate. The factors she uses and the indications she draws from different scoring ranges is too simplistic. Her ideas on proposing mediation in Chapter 4 are helpful. Every attorney as well as every mediator would want their clients to read Chapter 6, "Preparing for the Mediation Session." It has steps for inventorying assets and debts, worksheets, locating documents, income and expense budgeting and the like. She recommends using mediation-friendly lawyers. Chapter 11 addresses dealings with lawyers and other advisors. Stoner helps you and your client by chapters on Making the Most of the First Session, Communicating in Mediation, Negotiating, Encountering Difficulties in Mediation, Gender-related Obstacles, Mediating After Divorce, and by providing some useful appendices. RULE 31 AMENDED By order dated September 4th, the Supreme Court revised Rule 31 by deleting it in its entirety and substituting a new version. The Preamble was deleted. The new version introduces rules regarding arbitrators in non-binding arbitration, neutrals in mini-trials, and case evaluators. Documented observations are no longer required of mediators seeking Rule 31 listing. Trial Court Judges can conduct judicial settlement conferences. To serve as a neutral in a non-binding arbitration, min-trial or case evaluation, a Rule 31 neutral must be a lawyer in good standing and admitted to practice in Tennessee for at least 10 years for civil cases, and in family cases, a substantial portion of the lawyer’s practice during the 10 years must be in family cases. The revised Rule will soon be available at www.tsc.state.tn.us. Click on "Programs" on the left-hand side of the page and click on ADR Commission. SHEPHERD TATE CHARTS DIFFERENCES BETWEEN LITIGATION AND NASD/NYSE ARBITRATION Shepherd D. Tate of the Memphis law firm, Tate, Lazarini & Beall has contributed the following chart that identifies selected differences between litigation and arbitration of securities industry cases. Shepherd and his firm work in the field of securities arbitration, which includes employment disputes as well as broker-customer matters. Look for other information from Shepherd in future issues.
SECURITIES INDUSTRY ARBITRATION: DIFFERENCES IN THE RULES AND PROCEDURES OF THE NYSE AND THE NASD Note: The following is the text of Robert Clemente’s excellent article that updates for 2000-2001 his article in the Winter 2000 Dispute Resolution Magazine, Raod Map: Comparing Arbitration at the NYSE, NASD. Clemente is Director of Arbitration for the New York Stock Exchange, Inc. The article is reprinted with permission of the author. It may not be further reprinted or distributed without permission of the author. It is a long article, but we are providing it in full text, because it is one which you will want to retain and refer to when serving as an advocate, arbitrator or mediator in securities cases. Thanks to Shepherd Tate for bringing this important material to our attention. UPDATE 2001 Securities Industry Arbitration: Differences in the Rules and Procedures of the NYSE and NASD By Robert S. Clemente* © 1999, 2000, 2001 All Rights Reserved Since 1978, securities industry arbitration has generally followed the rules and procedures developed by the Securities Industry Conference on Arbitration (SICA).[1] These rules are contained in the Uniform Code of Arbitration ("UCA") and for most of the twenty-two years since the adoption of the UCA, the ten self-regulatory organizations ("SROs") offering arbitration did so under them. Today there are fewer SROs offering arbitration (and even fewer that are active) and the rules and procedures that apply are no longer as uniform as they once were.[2] While the basic arbitration process is substantively the same among the SROs, there are procedural differences which may impact a party’s decision on where to file a claim. This article highlights some of the differences between rules and procedures of the New York Stock Exchange ("Exchange" or "NYSE") and National Association of Securities Dealers ("NASD"), the two forums that administer over 99% of all securities industry arbitrations. It is offered as a guide to assist those who have a choice of forums. During the past five years, several differences between the arbitration programs of the NYSE and NASD have developed. The arbitration rules at the NYSE adhere substantially to the UCA, as amended over the years. The NASD’s rules have been expanded and amended, and reflect changes and additions not found in the UCA or the rules of other SROs. The differences, described below, pertain to: Time Limitation Upon Submission (Eligibility Rule) Simplified Arbitration (Small Claims) Claims Eligible for Arbitration** Employment Discrimination Claims** Defunct Firms** Injunctive Relief and Expedited Proceedings** Time to Answer Classification of Arbitrators Selection of Arbitrators** Chairperson Selection Discovery** Administrative Conferences and Large and Complex Cases ** Mediation** Adjournment Fees** Record of Proceedings Closing Arguments Punitive Damages Awards Schedule of Fees** At both forums the parties can agree to modify most of the rules and procedures. Anyone contemplating filing an arbitration at either the NYSE or NASD should obtain and consult the current rules of the forums and direct any questions to the appropriate forum administrator. 1. Time Limitation Upon Submission (6 Yr. Eligibility Rule - NYSE Rule 603; NASD Rule 10304) Both forums’ rules on eligibility are the same,[3] although each forum deals with the issue differently. Recently, eligibility has been less of an issue than it was a few years ago. At the NYSE, the initial determination of whether a claim is eligible for arbitration is made by a staff attorney before the case is accepted for filing. Once the claim is filed, any challenge to eligibility raised before the arbitrators are appointed is preliminarily determined by the Director of Arbitration ("Director"). Under NASD policy, no initial review or determination on eligibility is made; [4] all eligibility issues are decided by the arbitrators. 2. Simplified Arbitration (Small Claims) – NYSE Rule 601; NASD Rules 10302 and 10203 Both forums offer a simplified arbitration procedure. Under this procedure, a single arbitrator decides the case based solely upon the written submissions of the parties. A hearing will be held either upon the request of the public customer or the arbitrator. Simplified arbitrations are generally resolved quickly, with little or no discovery. At the NYSE, the Simplified Arbitration procedure applies to claims involving public customers when the claims do not exceed $10,000. However, in industry disputes the parties may agree to follow the simplified procedures. Parties may also agree to use the Simplified Arbitration process for claims in excess of $10,000. NASD rules provide for Simplified Arbitration of disputes involving public customers or industry parties with claims up to $25,000. NASD rules also provide for a hearing with a single arbitrator in claims between $25,000 and $50,000 unless a party or arbitrator requests a panel of three arbitrators.[5] 3. Claims Eligible for Arbitration a. Employment Discrimination Claims The NYSE will accept employment discrimination claims only when the parties have agreed to arbitrate after the claim arose. The NASD will accept employment discrimination claims when either a pre or post dispute arbitration agreement exists.
Effective January 18, 2000, the NASD adopted a new Rule 10210 series containing special rules applicable to the arbitration of employment discrimination claims. These new rules deal with: the qualification of arbitrators hearing claims of employment discrimination; the number of arbitrators hearing such claims; special rules for discovery, awards and attorney’s fees; coordination of claims filed in court and arbitration; and, disclosure to associated persons of the effects of the arbitration clause found in the Form U-4.[6] Arbitrators for Employment Disputes Under NYSE rules, all disputes involving either present or former employees of a member firm are, at the option of the employee, entitled to a panel of three arbitrators; a majority of these arbitrators shall not be from the securities industry unless the employee requests a majority from the securities industry. There is no provision for simplified arbitration (i.e. arbitration without a hearing) or a single arbitrator in employment cases. However, the parties may agree to these procedures to resolve employment claims. The NASD rules provide for one non-public arbitrator,[7] unless the parties agree to a public arbitrator, in certain employment disputes of $50,000 or less. In disputes over $50,000, a panel of three non-public arbitrators is appointed. Claims of $25,000 or less are decided by a single non-public arbitrator solely upon the pleadings. Other employment disputes (such as discrimination claims) are submitted to a panel of one or three arbitrators, a majority of whom are public arbitrators. b. Defunct Firms NYSE Rule 600(a) (Arbitration) and NASD Section 10301(a) generally require that any claim against a member or associated person shall be arbitrated as provided by any arbitration agreement or upon the demand of the customer. On April 6, 2001 the SEC approved the NASD’s proposed amendment to Rule 10301(a) that creates an exception to the enforceability of an arbitration agreement.[8] The new provision states: "A claim involving a member in the following categories shall be ineligible for submission to arbitration under the Code unless the customer agrees in writing to arbitrate the claim after it has arisen." The categories include a member whose membership is terminated, suspended, canceled or revoked, an expelled member or a firm which is otherwise defunct. The amendment stems from the GAO Report, which found that a substantial number of NASD arbitration awards were not paid in full. [9] As the GAO noted in most instances the firm was no longer in business. By adopting this exception to the enforceability of an arbitration agreement a customer with a claim against a defunct member may seek relief in court. 4. Injunctive Relief and Expedited Proceedings Although provisions for obtaining injunctive relief are not referred to in the NYSE Rules, the Exchange has historically scheduled expedited hearings on claims for injunctive relief when the parties agree. Under this process, the Exchange may schedule a hearing in as little as 24 hours after notice of the parties’ agreement. Procedurally, expedited hearings do differ from regularly scheduled hearings. Several of the time provisions in the rules are waived by the parties. Additionally, any pleadings are due no later than the commencement of the hearing. Also, no peremptory challenges to arbitrators are permitted. This voluntary process has been generally used in cases involving member firms and their employees. As the parties agree to this process, there is no issue regarding the arbitrators’ authority to grant injunctive relief. In 1995, the NASD adopted an Injunctions Rule on a pilot basis. NASD Rule 10335 has been extended to January 4, 2002 or until approval of proposed amendments filed with the SEC.[10] Under the existing rule, a party seeking an interim injunction may file in court or arbitration. If the party files in court, he is required to file simultaneously for permanent relief in arbitration. NASD rules provide for a hearing "no sooner than one and no later than three business days" after the request is made by the opposing party. Under the NASD’s currently pending proposal, the option of seeking temporary injunctive relief in arbitration is eliminated. 5. Time to Answer (NYSE Rule 612(c)(1)&(5); NASD Rule 10314(b)(1)&(5)) NYSE rules adhere to the UCA requiring Respondents to answer within 20 business days from receipt of the statement of claim. As a matter of policy, the NYSE will consider and generally grant a request for a two-week (10 business days) extension if the request is made before the answer is due. Any additional extensions are generally granted only with claimant’s consent. Under Simplified Arbitration, the answer is due within 20 calendar days. The NASD allows 45 calendar days for Respondent to answer. The NASD rule states that extensions are disfavored and will not be granted except in extraordinary circumstances. The answer is due within 20 business days in Simplified Industry Arbitration and within 20 calendar days in Simplified Arbitration involving customers. 6. Classification of Arbitrators The two SRO’s rules on arbitrator classification are substantially the same.[11] However, the recently amended NASD rules use the term "non-public" arbitrators; the NYSE rules use the term "securities industry" arbitrators. Another minor difference in the definition of NASD non-public arbitrators involves persons previously employed or "associated" with a securities firm. The NYSE rules classify an individual as being from the "securities industry" if that person has been associated with a securities firm within the past 5 years or spent a substantial portion of their business career in the securities industry. The NASD classification is limited to the past 3 years. The NASD rule also adds to the definition of "non-public" arbitrator someone who is "an employee of a bank or other financial institution that effects transactions in securities or supervises or monitors employees who engage in such activities."[12] Both forums also define a "public" arbitrator in substantially the same manner, that being one who does not fall within the definition of an industry or non-public arbitrator. A difference lies in the NYSE rules which incorporate separate Guidelines for Classification of Arbitrators that further define who may not be considered a "public arbitrator". The Guidelines also contain certain policies pertaining to challenges for cause that may arise from arbitrator classification. 7. Selection of Arbitrators In 1998 SICA amended the UCA to provide for a list selection method of arbitrator appointment. The NYSE has not formally adopted this change. Arbitrators are appointed by the Exchange under Rule 607. Each side has one peremptory challenge and unlimited challenges for cause. However, to obtain input from the parties on the issue of arbitrator selection, the Exchange instituted a Pilot Program in the Spring of 1998, offering several alternative methods of arbitrator selection. These alternatives provided parties with both greater choice and expanded participation in the selection of arbitrators. The choices were: (i) agreeing on who will serve as arbitrators; (ii) agreeing on a process for selecting arbitrators; or (iii) choosing one of the Exchange’s three alternative methods. These alternatives were: Random List Selection, Enhanced Selection, and AAA method, any of which may be modified by agreement of the parties. Since 1998 it has been the Exchange’s experience that in most cases parties do not wish to proceed under the alternative arbitrator selection methods. To date, parties have agreed to utilize one of the alternatives in less than 15 percent of the cases. In approximately 77 percent of the cases, parties did not respond to the Exchange’s notice of the availability of the alternative procedures. In light of this tepid response, and the few and conflicting evaluations received on these alternatives, the Exchange, rather than adopting "list selection" as a rule, revised the alternatives to make them simpler and easier to read. It is hoped that the parties will take the time to review and consider the simplified alternatives and provide greater feedback to the Exchange on which alternative, if any, is preferred. In addition, the Exchange submitted the alternative arbitrator selection methods as a voluntary pilot program for SEC approval. The procedures named "Voluntary Supplemental Procedures for Selecting Arbitrators" became effective August 1, 2000. Another indication that parties do not necessarily prefer list selection is the fact that parties who have a choice of forum file their claims at the NYSE. By filing at the NYSE these parties have the option of traditional forum appointment of arbitrators or list selection. It is presumed that if a claimant wanted list selection the respondent would consent rather than bear the higher fees associated with NASD arbitration. The highlight of the Voluntary Supplemental Procedures, like the original pilot, is that it offers the parties the opportunity to name their arbitrators, even from outside the NYSE pool, or chose the method upon which arbitrators will be selected – providing all parties agree. Also provided are two detailed alternative list methods of arbitrator selection the parties may agree to use: "Random List Selection" and "Enhanced List Selection." Random list selection provides for a randomly-generated list of 10 public and 5 securities arbitrators. Each side may strike any or all the names and rank the remaining names in order of its preference. If a panel cannot be completed from the first list, a second list containing three names for each vacancy is randomly generated. Each side may strike one name per vacancy and rank the remaining names in order of its preference. In the event that a "for cause" challenge is granted during the time the parties have to review the list, the Exchange will provide a new arbitrator name. This ensures that the parties have a full list to choose from. If the Exchange cannot assemble a complete panel from the second set of lists, arbitrators will be randomly selected, subject to challenges for cause. Enhanced list selection is a hybrid of forum appointment of arbitrators and party list selection. This procedure is called "enhanced" because the Exchange provides the parties with a list of 9 arbitrators (6 public and 3 securities) that are selected by the staff, based upon the arbitrators’ knowledge and experience. The arbitrators are not selected randomly. The Exchange developed enhanced list selection in response to some parties’ preference to retain the benefit of the staff’s knowledge of the arbitrators rather than rely on a purely random list. Each side may strike up to three names from the list and number the remaining names by order of its preference. If an arbitrator is removed "for cause" during the time the parties have to review and strike names from the original list, the Exchange will provide a replacement name. If the Exchange cannot complete a panel from the list, the Exchange will appoint arbitrators. Each side may exercise one peremptory challenge for each vacancy on the panel filled by the Exchange. Under both random list selection and enhanced list selection, parties may request additional information about arbitrators. When this occurs, the time to return the lists is automatically tolled until the information is received. In November 1998, the NASD’s rules were amended to provide for a rotational "list selection" method of arbitrator appointment. The NASD list selection rule is similar in operation to the NYSE’s List Selection Pilot. However, under the NASD rule, there is no provision for a second list if vacancies exist or for the automatic tolling of the time to return the lists if additional information about an arbitrator is requested. Parties are provided with lists of public and non-public arbitrators, and rank those not stricken in the order of their preference. The NASD appoints, on a rotational basis, arbitrators to complete a panel if unable to do so from the parties’ preference-ranked lists.[13] In February 2000, the SEC approved an NASD proposal for a two year Voluntary Single Arbitrator Pilot Program, effective May 15, 2000.[14] The Pilot Program, under new Rule 10336, allows parties with claims of $50,000.01 to $200,000 to select a single arbitrator to hear their cases. The single arbitrator is agreed to by the parties after the NASD has identified the three arbitrators appointed under the Neutral List Selection System.[15] At the time of this writing, statistics on this pilot were not yet available from the NASD. The NASD has proposed amendments to their rotational list selection process that would: (i) permit parties to agree to their own arbitrator selection criteria; (ii) select their own arbitrators from outside the NASD’s pool of arbitrators; (iii) provide for a second list of 5 names, if a panel cannot be appointed from the initial list, from which each party may strike 2 names. A fee is assessed for each of these options. The SEC has not as yet published these proposed amendments for public comment. Disqualification of Arbitrators At the NYSE, the Director decides whether to grant a challenge for cause before the first hearing.[16] If an arbitrator is challenged after the hearing has begun, the NYSE staff may discuss the Code of Ethics for Arbitrators and its withdrawal provisions with the arbitrator. However, the final decision on disqualification is left to the discretion of the arbitrator. The SEC recently approved an NASD proposal which grants the authority to the NASD Director of Arbitration (or the President) to remove an arbitrator for cause under limited circumstances after the commencement of the hearing.[17] 8. Chairperson Selection The NYSE rules provide that the Director may name thechairperson.[18] If the parties agree, however, they may select the chair. Any qualified member of the panel may serve as the chair. In practice, if the Exchange selects the chair, an arbitrator who has previously chaired and demonstrated an understanding of the hearing process will be selected. The person selected will usually possess the appropriate judicial temperament and have attended arbitrator chairperson training. Under the NASD rules, the parties have 15 days to agree upon the chair once they are notified of the names of the arbitrators.[19] If the parties cannot agree on a chair, the NASD designates the chairperson based on a procedure outlined in the rules. The NASD must appoint as chair the highest-ranked public arbitrator. The chair may not be an attorney, accountant or other professional who represents or advises customers in securities arbitration. 9. Discovery (NYSE Rule 619; NASD Rule 10321) Discovery under the rules of both forums follows the procedures set forth in the UCA which provide that "the parties shall cooperate to the fullest extent practicable in the voluntary exchange of documents and information to expedite the arbitration." The rules further require parties to "endeavor to resolve disputes regarding an information request prior to serving any objection to the request." Thereafter, at the request of a party, an arbitrator or at the discretion of the Director, discovery disputes may be referred to a pre-hearing conference. A pre-hearing conference is presided over by a person appointed by the Director. At the NYSE the person appointed to preside over the initial pre-hearing conference is usually a staff attorney who works with the parties in an attempt to resolve the dispute. Unresolved issues are referred to an arbitrator who, acting on behalf of the panel, may conduct a second pre-hearing conference. The arbitrator will issue an order resolving the discovery dispute. There is no fee for a pre-hearing conference with a staff attorney; a fee is assessed for a pre-hearing conference with an arbitrator. Under the UCA and the NYSE discovery rules, as supplemented by the guidance offered in the Arbitrator’s Manual, parties are required to cooperate voluntarily in the exchange of information and documents. The Arbitrator’s Manual contains a list of documents that have typically been disclosed or ordered disclosed by arbitrators in the past. This list is intended to guide parties and arbitrators in dealing with issues of discovery. Recent practice at the NASD is to have an "initial pre-hearing conference" conducted by telephone with the chairperson and assess a session fee rather than a pre-hearing conference fee. This practice will likely continue at the NASD, based on recent changes in its discovery provisions. On September 2, 1999, the SEC approved an NASD proposal that created a Discovery Guide[20] to assist the parties and arbitrators. According to the information in the SEC Release, a list of presumptively discoverable documents is sent to the parties upon service of the claim in cases involving customers. The parties are required to exchange the prescribed documents and information within thirty days from the date the answer is due. Any objections to the production will be considered by an arbitrator; the objecting party has the burden of rebutting the presumption of discoverability. The lists, a product of compromise according to the SEC Release, contain documents that have been requested or disclosed in previous arbitrations. They are intended as a guide and not as a limitation upon the arbitrator’s discretion. The NASD Discovery Guide also offers guidance on issues such as: confidential treatment of documents; additional discovery requests; depositions; admissibility; and arbitrator participation. The Release also states that the NASD Discovery Guide is intended to expand the guidance offered in the Arbitrator’s Manual published by SICA. The new NASD Discovery Guide is not a rule and therefore does not have an "effective date." According to the NASD, the Discovery Guide became "available for use" as of October 25, 1999."[21] Although both the SICA Arbitrator’s Manual and NASD Discovery Guide deal with depositions, neither suggests their regular use in arbitration. Nor do they lessen the arbitrator’s discretionary authority to rule on discovery. 10. Administrative Conferences and Large and Complex Cases In November 1998, the Exchange adopted a Pilot Program for Administrative Conferences in cases with claims of $500,000 or more. On December 29, 2000 the SEC approved a 2-year extension and amendments to the Pilot Program.[22] Under the revised Pilot Program, an Administrative Conference is scheduled in all cases with claims of $250,000 or more. The Conference, which may be conducted by the Chairperson by telephone conference call, will be scheduled within 90 days after service of the statement of claim. By agreement of all parties the conference may be scheduled at a later date. The intent of the Administrative Conference is to place the arbitrators in control of the pre-hearing process early in the case to expedite the proceedings. The NASD adopted a procedure for large and complex cases as a Pilot Program in 1995. The NASD procedure only applied to cases where the claim or counterclaim is at least $1,000,000, including punitive damages, or when all parties agree. Cases that qualify are scheduled for an Administrative Conference only if the parties jointly file a request. In order for an eligible claim to continue under the NASD’s Large and Complex Case Procedures, all parties must agree in writing. This process required parties to pay additional fees[23] and provided its own list selection of arbitrators.[24] In November 2000, the SEC approved the NASD’s proposal to accelerate the expiration of this pilot to December 31, 2000 from December 31, 2002.[25] The reasons cited by the NASD for this action was "that few parties were electing to proceed under the Rule" and that the procedures established by the Rule were now generally available in all cases. In both forums, the Administrative Conference, which may be conducted by telephone or in person, is intended to resolve preliminary issues and expedite discovery. At the Exchange, under the current provisions of Rule 639, a panel of arbitrators presides at the Administrative Conference and issues an order establishing a schedule for discovery and the evidentiary hearing. The panel may also rule on any other preliminary issues raised by the parties. The NYSE’s proposal to amend Rule 639 provides that the Administrative Conference take place by telephone conference call with only the chair presiding. The parties or the chair may request an in-person conference with the full panel. At the NASD the Initial Pre Hearing Conference is typically handled by telephone with only the Chair presiding. 11. Mediation For several years the NYSE informally facilitated mediation. A Pilot Mediation Program was adopted in November, 1998.[26] The NASD has had a formal mediation program with separate rules and fees since 1995.[27] Under the Exchange’s mediation program, the Exchange pays the mediator’s fee, up to $500 for the first mediation session of four hours or less, as an incentive to parties to mediate. The incentive payment applies in all cases with claims of $250,000 or more. The Exchange does not assess either party a fee for facilitating mediation.[28] The parties are responsible for the mediator’s fee in excess of the initial session or if the parties select a mediator whose fees exceed $500 for the initial session. The Exchange’s Pilot Mediation Program automatically applies in all cases with claims of $250,000 or more. As part of its newly amended mediation rule, the NYSE will accept for mediation any dispute eligible for arbitration at the NYSE prior to the commencement of an arbitration. To file directly for mediation, parties must submit an agreement to mediate and pay a non-refundable filing fee based on the amount of the dispute and in accordance with the Schedule of Fees for arbitration. If mediation is unsuccessful, the Exchange will apply the filing fee to the arbitration filing fee. The NASD has several rules regarding mediation.[29] The Exchange has only one rule and allows the parties and the mediator to establish procedures and ground rules. Both forums permit the parties to agree upon a mediator or choose the mediator by selecting one from a list provided by the forum. If the parties are unable to agree on a mediator, the Director, at both forums, will appoint one. 12. Adjournment Fees The UCA requires a party requesting an adjournment to deposit the adjournment fee at the time the request is made.[30] The New York Stock Exchange rule does not require a party requesting an adjournment to submit the adjournment fee unless and until the adjournment is granted.[31] The SEC recently approved an NASD proposal to amend Rule 10319 to remove the requirement that a party requesting an adjournment deposit the adjournment fee with the request.[32] Under the NYSE rule and the recently amended NASD Rule, the arbitrators may waive or direct the return of the adjournment fee. 13. Record of Proceedings (NYSE Rule 623; NASD Rule 10326) The rules of the NYSE and NASD are the same regarding maintaining a verbatim record of the arbitration hearings.[33] They differ, however, in the method of maintaining the record. The Exchange provides stenographic reporters at all hearings, at its expense. The NASD uses tape recorders, but the parties may, arrange for a stenographer at their own expense. 14. Closing Arguments There is no NYSE or UCA rule on closing arguments. The Exchange provides a suggested script for the chairperson’s Opening Statement. The Chairperson’s Opening Statement states that the Claimant may make the first Opening Statement and last Closing Argument. The arbitrators are free to change this procedure and have occasionally done so. The NASD rules (IM-10317) provide that Claimant goes first in Closing Arguments, but may reserve time for rebuttal; the arbitrators may vary this process. 15. Awards The rules of both forums on awards are similar and follow the UCA. The Exchange Rule differs in that customer parties may request their name be removed from the version of the award that is publicly available.[34] The NASD rule has a subsection which requires the parties to pay immediately all NASD fees and assessments upon their receipt of the award.[35] In general, the NASD awards appear lengthier, because of detailed case descriptions and recitation of administrative matters. The NASD recently announced that, effective September 18, 2000, firms will be required to certify in writing that they have complied with arbitration awards within 30 days of receipt.[36] The NASD is also requesting claimants who have prevailed in arbitration to notify the NASD if a member or associated person has not paid the arbitration award. This was done in response to concerns raised in a recent study of securities arbitration conducted by the U.S. General Accounting Office.[37] 16. Schedule of Fees The cost of arbitration differs significantly between the two forums. The Exchange provides arbitration as a subsidized service for the benefit of member firms, customers and employees of member firms. At the NASD, the arbitration program is designed to be financially self-supporting.[38] The fees assessed in NASD arbitrations have increased over the past several years. In 1994, the NASD began assessing a Member Firm Surcharge. In January of 1998, the NASD increased the Surcharges and began assessing Process Fees against each member or associated person named in an arbitration. Under NASD rules, members are assessed the "Member Surcharge" when they are served with a Claim, Counterclaim, Cross-Claim or Third Party Claim. The process fees are imposed at several stages of the proceeding. In March 1999, the SEC approved an NASD increase in the initial filing fees and hearing session deposits required to commence arbitration. The Exchange has not adopted the Member Surcharge, or Process Fees, and has not raised its filing fees or hearing session deposits. A large portion of the NASD cost of arbitration is assessed against member firms in the form of the Member Surcharge and Process Fees. Although the NASD rules state that the Member Surcharge and Process Fees "shall not be chargeable to any other party," the NASD rules permit arbitrators to award costs to a party without exception or limitation. At the NYSE, the filing fee for an industry claimant is $500; at the NASD, the filing fees for a Member Claimant range from $200 to $5,000. In addition, the initial costs to a customer (or associated person) to file a claim at the NASD are significantly higher than at the NYSE. In July 2001, the SEC approved an NASD proposal to "Modify Certain Provisions Relating the Assessment and Payment of Fees.[39] Included in the changes is Rule 10306 which provides for the assessment of fees in settled cases; Rule 10319 (adjournments discussed above), and Rule 10328 providing for the recalculation of fees, deposits, surcharges and processing fees where a claim is amended to increase the amount in dispute. The table below compares the total fees assessed in a hypothetical $100,000 claim including one pre-hearing conference and two days of hearings before a panel of three arbitrators. The table includes the initial cost to a customer claimant, initial costs to member firm and total hearing fees assessable against one or both parties.
17. Punitive Damages Traditionally, the SICA Uniform Code of Arbitration and the arbitration rules of SROs were strictly procedural. In 1989, the UCA was amended to add Section 31, "Requirements When Using Pre-Dispute Arbitration Agreements with Customers."[40] The rule was intended to enhance public awareness that certain customer agreements used by broker-dealers contain an arbitration clause. In addition to public disclosure, Section 31 prohibits the inclusion in any agreement of "any condition that limits or contradicts the rules of any self-regulatory organization or limits the ability of a party to file any claim in arbitration or limits the ability of the arbitrators to make any award." In the years since its adoption by SICA, Section 31 has been interpreted as prohibiting arbitration agreements from imposing any limitation on the remedies a claimant could seek or arbitrators could award. In fact, the NYSE and NASDissued two joint Information Memos/Notice to Members which specifically statedthat this prohibition applied to any attempt to limit the authority of arbitrators to award punitive damages. [41] However, in 1997, the NASD filed a proposed rule change with the SEC that would limit an award of punitive damages.[42] The NASD proposal limits the punitive damages arbitrators could award to $750,000 or two times compensatory damages, whichever is lower. In May 1999, the NASD filed an amendment to the punitive damages cap rule, providing that a contract may limit punitive damages to no more than twice compensatory damages, or $750,000, whichever is lower. To date, no action has been taken by the SEC on this amendment. Conclusion Each forum’s rules are designed to insure a swift resolution of claims and a fair hearing. Although the cost difference is significant, one should consider all the other various factors that differ between the two forums. At the NYSE, new claims are typically served on the respondent within a week or less of receipt. The NASD processes claims, on average, within 30 days of receipt. At the NYSE, the average time from receipt of a new filing to closure of a case file is approximately 9 months; claims decided by arbitrators are resolved in an average of under 11months. At the NASD all claims are resolved in an average of 12.8 months fromservice of the claim to award; regular claims average 16.6 months.[43] Both forums are experiencing an increase in the time claims are resolved. This is partly a result of the increased amount of time arbitrator selection takes under the new procedures. At the NYSE, a staff attorney (Arbitration Counsel) is assigned to each case upon filing of the claim. This attorney remains with the case and is available to assist and guide the parties throughout its pendency. An NYSE Arbitration Counsel usually attends the hearing. The NASD employs more non-attorneys for case processing and it is unusual for staff attorneys to attend the hearings. The NYSE has its arbitration offices in New York City. Hearings are held in approximately 40 cities, including San Juan, Puerto Rico. The Exchange will also consider requests for hearings in other cities, including locations in Europe and Asia. The NASD has regional offices in New York City, Chicago, Boca Raton and San Francisco. In addition, it has satellite offices in Washington, D.C. and Los Angeles. The NASD conductshearings in approximately 46 cities, although all claims are initially processed in New York. Regardless of which forum you choose, it is hoped that this article will be helpful in making an informed choice. * Robert S. Clemente is the Director of Arbitration of the New York Stock Exchange, Inc. The views expressed herein are solely those of the author. The author acknowledges and thanks David Carey and Karen Kupersmith ofthe NYSE Arbitration Department for their editorial assistance, and George Friedman of the NASD for his cooperation in the preparation of this article. This article has been revised and updated for PIABA’s 10th Annual Meeting. The original article Road Map: Comparing Arbitration at the NYSE, NASD, was originally published in Dispute Resolution Magazine, Winter 2000. [1] For an in-depth discussion of the history and development of SICA and the Uniform Code of Arbitration see: Katsoris, SICA: The First Twenty Years , 23 Ford.URB. L.J. 483(1996). [2] Today, through consolidation of arbitration programs and mergers, there are six SROs which offer arbitration: Boston Stock Exchange, Chicago Board Options Exchange, Chicago Stock Exchange, National Association of Securities Dealers, New York Stock Exchange, and the Pacific Exchange. ** Denotes specific, substantive update for Years 2000 and 2001 editions of this article. [3] The NASD has filed a proposal with the SEC to amend its rule on eligibility. That proposal isstill awaiting SEC approval (see: SEC Release No. 34-39487 (12/23/97)). [4] See New Procedure for Claim Processing (2/16/99) www.nasdr.com/280/a.htm. [5] See also NASD Rule 10202 and 10308(b)(1)(A)(i). [6] NASD Notice to Members 99-96, December 1999. [7] The NASD uses the term "non-public arbitrator" which is defined the same as what the UCA and NYSE rules referred to as "from the securities industry." [8] SEC Release No. 34-44158 (April 16, 2001). [9] Securities Arbitration: Actions Needed to Address Problem of Unpaid Awards, GAO-01-654R(4/27/01). [10] See SEC Release 34-43813; File No. SR-NASD-0075 (1/5/01). As of the date of this update this proposal is still pending SEC action. [11] See NYSE Rule 607, NASD Rule 10308(a)(4). [12] See NYSE Guidelines for Classification of Arbitrators: bank employees engaged in securities transactions or who supervise or monitor employees engaged in such activities could not be classified as public arbitrators. [13] The NASD is currently considering several changes to its rotational list selection process. [14] See SEC Release No. 34-42226 (4/15/00), Fed. Reg. Vol. 65, No. 35, 8753 (2/22/00). [15] NASD Notice to Members 00-22, April 2000. [16] See NYSE Rule 608. [17] SEC Release No. 34-43695 (File No. SR-NASD-0034) December 8, 2000 (amendment to NASDRule 10308 and 10312). [18] See NYSE Rule 607(b). [19] See NASD Rule 10308(c)(5). [20] SEC Release No. 34-41833 (Sept. 2, 1999) 64 FR 49256 (File No. SR-NASD 99-07). [21] See nasdadr.com. [22] See SEC Release No. 34-43785; File No. SR NYSE-00-39 (12/29/00) [23] See NASD Rule 10334(a)(4). [24] See NASD Rule 10334(c). [25] SEC Release No. 34-43535 (Nov. 8, 2000) 65 FR 69592 (File No. SR-NASD-00-65). [26] See NYSE Rule 638 as amended November 29, 2000; See SEC Release No. 34-43785; File No. SR-NYSE-00-39. [27] See Generally NASD Rules 10400 et seq. [28] See NASD Rule 10407 for fees applicable to NASD mediation (adopted and approved, August 11,2000, effective November 1, 2000). [29] See NASD Rules 10400 et. Seq. [30] See SICA UCA Section, 10(b) (1/19/01). [31] See NYSE Rule 617(b). [32] See SEC Release 34-44573 (7/18/01). [33] The NASD rule was amended in 1995 to include a subsection regarding mediation. The NYSE rules have a similar provision, stating that no record is to be kept of a mediation (see NYSE Rule 638(e)). [34] See NYSE Rule 627(f). [35] See NASD Rule 10330(g). [36] NASD Notice to Members 00-55, August 2000. [37] Securities Arbitration: Actions Needed to Address Problems of Unpaid Awards, GAO/GGD-00-115 (June 2000). [38] See generally NYSE Rule 629, NASD Rules 10205, 10332, 10333. [39] See SEC Release No. 34-44573 (July 18, 2001). [40] See NYSE Rule 636. [41] NYSE Information Memo 95-16 (4/17/95) and 95-43 (10/16/95), NASD Notice to Members 95-16 (4/17/95). [42] SR-NASD-97-47 SEC Release No. 34-39371 (Nov. 26, 1997) 62 F.R.64428 (Dec. 5, 1998). [43] Statistics as of October 2000. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
     
© Copyright 2001 Tennessee Bar Association |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||