NASD Modifies Arbitrator Selection Modifications


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Selection Modification Proposal Is Itself Modified

NASD-DR has submitted some clarifying changes to its proposed Rule amendments concerning arbitrator selection. The changes, submitted to the Commission in connection with File No. SR-NASD-2001-41, primarily amend the explanatory language in the Rule proposal, as opposed to the text of the Rule itself.

The original proposal will, if approved, amend NASD Rules 10308 and 10313 to: (1) permit parties to choose arbitrators ex-NLSS or to use NLSS to select arbitrators using criteria other than the default criteria; (2) require that arbitrators serving in cases where a single arbitrator will preside over hearings have the experience of at least two prior decided arbitrations; and (3) provide for a second list of prospective arbitrators.

The amendatory language clarifies that item 2 above will apply only to cases in the $25,001-$50,000 range and not to small claims matters or those utilizing the single-arbitrator pilot. It also specifies exactly when a new $200 fee for added NLSS processing will apply, how it will be divided among the parties, and what the fee is designed to cover. Parties who select their own arbitrators are advised that challenges for cause and arbitrator removal provisions continue to apply to their Panelists.

One change to the text of the proposed amendments is made, in order to assure that the option to select one’s own arbitrators or to use selection criteria is adopted post-dispute between or among the parties. Amended Rule 10308(b)(4)(C) now reads that the alternatives will only be available to parties who agree “[a]fter the dispute arises….”

This Amendment No. 1 was submitted to the SEC on August 9, 2001; the proposal has not yet been released for comment. (SAC Ref. 01-33-01)

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Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article. 

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