GAO Studies Arbitrator Disclosure

No further recommendations made.

GAO STUDIES ARBITRATOR DISCLOSURE: In early November, the U.S. General Accounting Office responded to a congressional inquiry on the adequacy of NASD’s procedures in updating its arbitrators’ biographical records for disclosure to parties.

In a brief report entitled “Procedures for Updating Arbitrator Disclosure Information,” (GAO-01-162R), the GAO states that it has no “further recommendations at this time” for improvements in this area. That is so, the report adds, because “NASD-DR has made improvements and plans to initiate additional improvements to its procedures for updating arbitrator disclosure information….” Congressman John D. Dingell (D-MI) requested the study in March 2000, in apparent response to an arbitrator complaint that “updated information on [his] employment status …” was not entered into the NASD arbitrator disclosure information database. As a result, parties to an arbitration did not receive that information until after their case had begun.

The report does not minimize the incident, but does explain the steps NASD-DR has taken to obtain more reliable and frequent updates of changes in arbitrator information and how it has improved its updating procedures.

Beginning in November 2000, NASD-DR has centralized the maintenance of the arbitrator roster in the New York headquarters, making the updating process exclusively a responsibility of the Department of Neutral Management. Moreover, online forms are now available for use by arbitrators to report, via the NASD-DR WebSite on any changes.

Down the road, arbitrators will be able to access their biographical records. For now, NASD-DR is giving copies of the disclosure reports of fellow panelists to appointed arbitrators, in the hope all will be encouraged to follow the best examples of disclosure.

The SEC’s view on the report, expressed in a letter from SEC Chief Counsel Catherine McGuire, dated October 24, 2000, signals agreement: “…[T]he steps taken or soon to be taken by NASD-DR … reasonably address this issue. The Commission’s inspection staff has advised me that it intends to monitor the implementation of the revised procedures planned for later this year as part of its routine inspection cycle.”

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