NASD Will Soon File Revised Rules Regarding Awards and Subpoenas
At the March 21, 2006 breakout session at the SIA Compliance and Litigation conference involving arbitration, Linda Fienberg, NASD, discussed two changes to NASD arbitration rules of special interest to the industry. The first rule -- "the explained award rule" -- will require arbitrators to provide explanation or rationale for their awards. This rule change stems from concerns raised by investor advocate groups, who wanted more clarity for investors regarding arbitration results. Feinberg indicated that the NASD received around 200 comment letters to the proposed Rule, mostly from industry representatives expressing concerns that the new Rule will result in higher costs and confusion as to what is expected of arbitrators. Fienberg said that while the NASD does plan to go ahead with the Rule, language in the final Rule will stress that explained Awards will not be of precedential value and are to be used only for the information of the parties. She also said that the NASD will provide examples as to the level of detail in Awards intended by the new Rule, stressing that Awards will not need to address each and every cause of action set forth in the Statement of Claim.
Feinberg also informed conference participants that the NASD will soon be filing a revised version of the non-party subpoena Rule. Under the revised Rule, only arbitrators - not attorneys - can issue subpoenas. Also, the revised Rule requires a party receiving subpoenaed records to notify the other parties within five days of receipt of documents. Attendees expressed concern with the proposed revisions, noting that subpoenaed records from brokerage firms are often the only records received of customers' trading histories. Industry members fear that requiring arbitrators to sign subpoenas will result in delay and, perhaps, an inability to obtain documents where inexperienced arbitrators do not understand the importance of brokerage account records. Fienberg said that the NASD will provide an opportunity to comment on the proposed changes to this Rule.
Perhaps I am in error; but I believe that it is not easy, and maybe not possible, to get a sense of the fairness one can expect from the NASD arbitration process because of the difficulty of obtaining access to information.
As I understand it, and ignore this if I posess obsolete information, no one knows who the NASD arbitrators are until you file for arbitration and then you are only given a few names. I submit this is both too little and to late.
In a rare event it was published that Charles Braisted was now a public arbitrator by virtue of his having served as an industry arbitrator for a sufficient time. Parenthetically, he was a many decades long securities attorney at Davis Polk doing mostly blue sky for Merrill and other wirehouses. If he is now a public mediator; one would have to question the fairness of the system.
Worse yet, is there anything in place to prevent NASD from assigning him to as many arbitrations as possible while giving no arbitrations to someone with a more pro-consumer outlook? Are there any Ralph Naders or other pro consumer advocates among the arbitrators and do they get their fair share of arbitrations?