NASD Notice to Members 05-09 - January 2005

NASD Amends Rule Governing Predispute Arbitration Agreements with Customers; Effective Date: May 1, 2005

Executive Summary

The Securities and Exchange Commission (SEC) has approved amendments to NASD Rule 3110(f) that require firms to modify their predispute arbitration agreements with customers to provide enhanced disclosure about the arbitration process.1 The amendments also: require members to provide copies of predispute arbitration agreements and relevant arbitration forum rules to customers upon request; clarify the use of certain limiting provisions; and require firms seeking to compel arbitration of claims initiated in court to arbitrate all of the claims contained in the complaint if the customer so requests. Rule 3110(f), as amended, is attached as Attachment A (new language is underlined; deletions are in brackets).

 

The effective date of this rule change is May 1, 2005. Predispute arbitration agreements will be governed by the version of Rule 3110(f) in effect at the time the agreement was executed, except that Rule 3110(f)(3) as amended applies to all new and existing agreements.

 

Questions regarding this Notice can be directed to Laura Gansler, Assistant General Counsel, Regulatory Policy and Oversight, at (202) 728-8275; or Jean I. Feeney, Vice President and Chief Counsel, Dispute Resolution, at (202) 728-6959.

 

The compliance date of new Rule 3110(f)(1) requirements has been extended to June 1, 2005. See the SEC's release at: http://www.sec.gov/rules/sro/nasd/34-51526.pdf