The Securities and Exchange Commission has approved a number of improvements to the NASD Code of Arbitration Procedure, including simplifying its language and reorganising it in a more logical, user-friendly way. These and other revisions will codify best practices and provide more guidance to parties and arbitrators in the NASD Dispute Resolution (DR) forum.
The newly approved Code is now separated into three parts: the Customer Code, the Industry Code, and the Mediation Code. To make it easier to find specific rules, the code is now organised to follow the sequential order of a typical arbitration.
“NASD continues to make significant improvements to the dispute resolution forum to make the process more transparent, fair and efficient for investors and others who use the forum,” says Linda Fienberg, the president of NASD DR.
The new code also makes it mandatory that parties must produce (or formally object to producing) documents requested in the discovery process. In addition, the code codifies the ability of arbitrators to sanction parties for non-compliance with the discovery rules or orders of the panel. Collectively, these changes should significantly reduce the number of discovery disputes in NASD arbitrations involving customer disputes. The new rules also establish uniform procedures for filing, responding to and ruling on motions in NASD arbitrations.
The new code refines the arbitrator selection process through creation of a new roster of public arbitrators who are qualified to serve as chairpersons in cases involving investors. Arbitrators must have a specific amount of training and experience to qualify to serve as a chairperson.
The new Customer and Industry Codes will apply to claims filed on or after the April effective date, with the exception of the list selection provisions. The arbitrator list selection rules will apply to new claims, to previously filed claims in which a list of arbitrators has not yet been generated, and in claims for which an entirely new list of arbitrators must be generated.