Thursday, October 8, 1998
NASD Proposes Enhancements to Arbitration of Securities Industry Employment Discrimination Claims
Washington, D.C.—The National Association of Securities Dealers, Inc. (NASD®), today announced several enhancements to the dispute resolution process for employment discrimination claims within the securities industry.
These enhancements to NASD’s arbitration forum include:
In addition, the Board announced that the NASD will propose a rule to provide enhanced disclosure to all employees concerning the nature and effect of the arbitration clause contained in the Form U-4, the document that all registered representatives must complete to enter the securities industry or change firms.
The proposed changes to the Code of Arbitration Procedure will include the development of regional committees that will select arbitrators eligible for placement on the roster for disputes between firms and employees that involve allegations of statutory discrimination. Attorneys who typically represent employees, attorneys who represent firms, and neutral arbitrators will make up the committee and will serve staggered two-year terms.
Under the proposed changes, all arbitrators for cases involving employment discrimination will be ‘public’ arbitrators, that is, non-industry, neutral individuals who do not represent primarily the interests of employers or employees. Currently, panels hearing employment discrimination cases mirror those hearing customer disputes and include either one non-industry arbitrator (single arbitrator cases) or two non-industry arbitrators and one industry arbitrator (three arbitrator cases).
This proposal includes a subject-matter expertise standard for all arbitrators hearing employment discrimination claims, and additional standards for those employment arbitrators who will serve on single-arbitrator panels or as chairs of three-person panels.
A recent rule change by the NASD will allow statutory discrimination cases to be filed in court. Since claims may include several different grievances, ‘bifurcation’ of cases could occur; the discrimination claims could proceed in court and the remaining issues, still subject to mandatory arbitration, would proceed in arbitration. The change proposed by the NASD would provide that, if an employee files a discrimination claim in court and files related claims in arbitration, the employer or another respondent would have the option to combine all claims in court.
The NASD has also committed to improve the quality of its arbitration forum for the resolution of discrimination claims through increased diversity on arbitration panels, specialized training of arbitrators, and other enhancements.
Of the nearly 6,000 cases filed in the NASD’s arbitration forum last year, 139 involved discrimination claims.
The NASD’s proposed changes to the Code of Arbitration Procedure will be submitted to the Securities and Exchange Commission for approval.
The National Association of Securities Dealers is the largest securities-industry self-regulatory organization in the United States. Through its subsidiaries, NASD Regulation, Inc., and The Nasdaq Stock Market, Inc., the NASD develops rules and regulations; provides a dispute resolution forum; conducts regulatory reviews of members’ activities; and designs, operates, and regulates securities markets all for the benefit and protection of investors.