The Neutral Corner - February 2007
Consolidation of NASD and NYSE Regulation
In November 2006, NASD and the NYSE Group announced a plan to consolidate their brokerage firm regulation and dispute resolution operations into a single self-regulatory organization (SRO) that will be the single regulator for all 5,100 securities firms doing business with the public in the United States. The new SRO will be responsible for all member regulation, arbitration and mediation, and for, among other things, overseeing all firm compliance examinations, rule writing, professional training, licensing and registration, and industry utilities.
In January 2007, following overwhelming Board approval, NASD firms strongly voted in favor of the By-Law changes that are necessary for the consolidation to occur. The organizations will be consolidated as soon as practical after SEC (the Securities Exchange Commission) approval and the transaction's conclusion. This transaction is expected to close during the second quarter of 2007. NASD Chairman and CEO Mary L. Schapiro will serve as the new SRO's CEO.
New Arbitration Codes
On January 24, 2007, the SEC approved NASD's Codes of Arbitration Procedure for Customer and Industry Disputes (new Codes). The Mediation Code was approved by the SEC in 2005 and became effective in January 2006. The new Codes will become effective on Monday, April 16, 2007. This issue of The Neutral Corner includes the recently published Notice to Members 07-07 (NTM 07-07), which highlights the significant changes to the new Codes.
NASD undertook the Code revision project in response to an SEC initiative to encourage self-regulatory organizations to use "plain English" in materials for investors. NASD divided the Code of Arbitration Procedure (old Code) into three separate Codes: Customer, Industry and Mediation. Under the new Codes, NASD implemented a new numbering system, which moves the old Code from the 10,000 series of the NASD Manual and establishes the Customer Code in the 12,000 series, the Industry Code in the 13,000 series and the Mediation Code in the 14,000 series. The new Codes use more common words, an active voice and shorter sentences. The new Codes also include a reorganization of the rules to approximate the sequential order of a typical arbitration proceeding, codify well-established procedures, and implement substantive changes to assist in streamlining and simplifying the administration of arbitrations in NASD's forum.
In conjunction with the approval of the new Codes, we have created a new online course to educate users of our forum about the key changes. For the first time, we will make our online training available to a broader audience: arbitrators, parties, representatives and any other interested persons.
This new training is mandatory and free for all arbitrators on our roster; we ask arbitrators to complete the online training prior to serving on any case filed on or after April 16, 2007. Arbitrators who don't complete the training within a reasonable time period may be temporarily removed from the roster for future service until they complete the training. (The time periods for completing the training will be announced in a future edition of The Neutral Corner.) The course takes approximately two hours to complete, and there is a short online mastery test that arbitrators must complete at the conclusion of the training. NASD Dispute Resolution's Department of Neutral Management will send an email, so you may register as soon as the course is available on our Web site. If you need to provide NASD with your email address or update your existing email information, please do so by updating your arbitrator profile at www.nasd.com. Our experienced staff is ready to help you master the new Codes and answer any questions you may have, so please do not hesitate to contact your regional office staff, or submit your questions to the editor of The Neutral Corner at email@example.com.
Arbitrator Call-in Workshop
NASD will conduct a call-in workshop for arbitrators on March 1, 2007, from 12 p.m. to 1:15 p.m. Eastern Standard Time to discuss key changes in the new Codes and the impact of the new subpoena rules. Discussion on the new subpoena rules will highlight key aspects of Arbitrators' Authority to Issue Subpoenas and to Direct Appearances. For more information on the new subpoena rules recently approved by the SEC, see SR-NASD-2005-079 approved on January 3, 2007, and SR-NASD-2006-101 approved on January 16, 2007. Linda Fienberg, President of NASD Dispute Resolution, and Richard Berry, Vice President and Director of Case Administration, will host the workshop.
NASD Small Conference Series
Join us for an NASD Small Firm Conference on February 22, 2007, in Los Angeles or March 14, 2007, in New York City.
NASD Small Firm Conferences are specifically designed to help small broker-dealer firms identify best practices for compliance and supervision matters. Please join us to share common experiences, and to hear and discuss updates on the latest securities regulations.
Both upcoming Small Firm Conferences will feature a session on Arbitration and Mediation. Other session topics include supervision and supervisory controls, clearing and introducing firm relationships, anti-money laundering, and compliance tools and resources.
Visit www.nasd.com/smallfirmconf to view the full agenda and register online. Discounted registration rates are available for the conference in New York City until February 22, 2007. CPE (Continuing Professional Education) credit is available for both Small Firm Conferences. NASD is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. CLE credit may be available for the Los Angeles conference. NASD tried but was unable to receive pre-approval for this program from the New York State Bar. Attorneys from New York, as well as other jurisdictions, may wish to check with their bar authorities to see whether they can receive CLE for this program.
For questions, call (800) 321-6273.
Message from the Editor
New Editor-in-Chief, Shari Sturm
It is a great honor for me to serve as the new Editor-in-Chief of The Neutral Corner. I started as a Staff Attorney in December 1987 in our New York Dispute Resolution office and most recently served as the Regional Director for the Mid-Atlantic Regional Office. I am now the Director of Constituent Relations and the new editor of The Neutral Corner. I want to thank my predecessor, Jisook Lee, for her outstanding work as editor. I look forward to her continued contributions as a member of the Editorial Board.
For now, don't expect big changes. I do want to hear your thoughts on how we can continue to improve this fine publication, but our primary goal remains the same: to publish a newsletter to inform arbitrators and mediators on developments of interest. To that end, we welcome your suggestions for new articles, topics and any other ideas you wish to share. The Neutral Corner will remain informative and relevant by continuing to provide you with the latest dispute resolution information and answers to your questions. Please send suggestions, questions and ideas to:
Editor, The Neutral Corner
NASD Dispute Resolution
1735 K Street, NW, Washington, DC 20006
You may also email me at firstname.lastname@example.org.
Question and Answer: Timing of Motion Deadlines
Question: Recently, I was a panel member on a case where the parties filed motion papers on the eve of the hearing. The panel had to rule immediately. We promptly read the motion papers, deliberated, and issued our ruling the day before the hearing. Could we have done something to avoid this last-minute ruling crunch?
Answer: Yes. We recommend that panels set motion deadlines (typically during the Initial Prehearing Conference) at least 10 days before the prehearing conference or hearing. (As you all know, the initially scheduled conference—where the parties and arbitrators set the schedule for the case—is referred to as the Initial Prehearing Conference. Subsequent meetings, with the exception of the merits hearing, are called pre-hearing conferences.) The panel should keep in mind that motion papers usually include moving papers, responses and occasionally, replies. The panel should schedule its motion deadlines so the final submission is received at least 10 days before the prehearing conference or hearing. The final submission must be served directly on every other party, and NASD, at the same time and in the same manner. When filing the submission with NASD, the party must also file with NASD additional copies for each arbitrator. This advance scheduling of motion deadlines provides NASD staff with sufficient time to send the papers to the panel, which gives the panel sufficient time to review them. Providing ample time for motion deadlines saves the parties the cost of an overnight courier service to expedite the delivery of its motion papers to the panel.
For cases administered under the new Codes, written motions must be served at least 20 days before a scheduled hearing, unless the panel decides otherwise. Also, the new Codes provide that parties responding to motions have 10 days from receipt to respond, unless the panel or Director decides otherwise. Responses to written motions must be served directly on all other parties at the same time and in the same manner. Responses to written motions must also be filed with NASD, with additional copies for each arbitrator, at the same time and in the same manner in which they are served on the parties.
Northeast Regional Update
During the next three months, the Northeast Regional Office will be conducting in-person Basic Panel Member Training* in these cities on the following dates:
Please contact Cheree White at (212) 858-4063 or by email if you are interested in attending a Basic Panel Member Training program in any of these cities.
Midwest Regional Update
The Midwest Regional Office is delighted to announce that Regional Director Scott Carfello has been promoted to Associate Vice President. Scott joined NASD in March 2004 as Regional Director after spending almost eighteen years with the American Arbitration Association. His last position with AAA was as District Vice President in Chicago.
During the next two months, the Midwest Regional Office will conduct in-person Basic Panel Member Training in these cities on the following dates:
Please contact Deborah Woods at (312) 899-4431 or by email if you are interested in attending a Basic Panel Member Training program in any of these cities.
Southeast Regional Update
During the next three months, the Southeast Regional Office will conduct the in-person component of NASD's Basic Arbitrator Training Program in these locations on the following dates:
Please contact Lanette Cajigas at (561) 447-4911 or by email if you are interested in attending an onsite classroom training program in any of these locations.
West Regional Update
During the next three months, the West Regional Office will conduct in-person Basic Arbitrator Training programs in these locations on the following dates:
Please contact Tiffany Hansmann at (213) 613-2684 or by email if you are interested in attending a Basic Arbitrator Training program in any these locations.
* Note: Participants must successfully complete the online portion of basic arbitrator training before attending the onsite training program. Please visit the Arbitrator Training page of our Web site at www.nasd.com for more information about basic arbitrator training.
California Local Counsel Rule
On June 26, 2006, the California legislature amended the California Code of Civil Procedure Section 1282.4 to require non-California attorneys to meet certain obligations before they may represent parties in private arbitration proceedings in California. The amendment became effective on January 1, 2007.
The amendment provides that, under California law, attorneys who are not licensed in California may not appear in NASD's arbitration forum in California in a representative capacity unless they associate with a California attorney who will be the attorney of record, and provide NASD Dispute Resolution with a completed Certificate of Out-of-State Arbitration Counsel and notice of intent to appear in arbitration.
A party's failure to comply with Section 1282.4 may be raised with the arbitrators or with the California State Bar. Attorneys who fail to comply with Section 1282.4 are subject to possible penalties under state law and risk being prohibited from representing their client in arbitration.
Additional information on this amendment and the Non-California Attorney Certification Form may be obtained from the State Bar of California's Web site www.calbar.ca.gov.
Linda D. Fienberg
George H. Friedman
Kenneth L. Andrichik
Jean I. Feeney
Richard W. Berry
Barbara L. Brady
Elizabeth R. Clancy
Judith Hale Norris
Associate Vice President
MATRICS DR Business
Editor of The Neutral Corner
Nicole Haynes - Northeast Region
Lisa Lasher - Southeast Region
Mignon McLemore - Office of Chief Counsel
Rina Spiewak - West Region
NASD Dispute Resolution Offices
5200 Town Center Circle
Boca Raton, FL 33486
Tele: (561) 416-0277
Chicago, IL 60603
Tele: (312) 899-4440