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Overhaul of Dispute Resolution Procedural Codes Continues


The last of the three segments of the Code overhaul by NASD Dispute Resolution was submitted for approval to the SEC on January 23, 2004 (SR-NASD-2004-13); this third “Mediation Code” utilizes the Rule 14000 Series to set forth the rules for NASD mediation.

This rule filing is part of a comprehensive plan to overhaul the NASD Code of Arbitration Procedure by splitting it into its three basic elements: a Customer Code, an Industry Code, and this Mediation Code. The first two have been previously filed with the Commission and all three segments will likely be published for comment in the Federal Register at once.

NASD’s stated purpose in undertaking this project is to simplify the Codes by putting them into a more logical order, one that follows the process, and “to rewrite the three Codes using plain English, in accordance with the Commission’s plain English guidelines.”

In addition, NASD has included some significant, substantive changes in the Customer and Industry Codes, but states in this filing that it “is not proposing substantive changes to the current rules governing mediations.” Of course, one reason for reorganizing the current mediation provisions into a separate Code relates to ease of use, but it is also true that today parties enter mediation directly. Parties remain free to access mediation while pursuing the arbitration process, but, where both sides are sufficiently familiar with dispute resolution mechanisms, going directly to mediation can actually save time and expense.

According to NASD-DR, the new Code differs from the current mediation rule provisions only in that: (1) the rules are now written in the plain English format; and (2) there is a new Definitions Rule that defines the terms used throughout the Code. (SAC Ref. No. 2004-06-01)



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