|Thursday, November 6, 2003
Nancy A. Condon
NASD Reminds Firms of Obligation to Provide Information Without Delay in Arbitrations
Washington, DC – NASD today reminded securities firms of their obligation to comply with NASD discovery rules and procedures for production of documents and materials in arbitration claims. NASD’s Dispute Resolution division will continue to monitor compliance and will refer any perceived abuses to NASD Regulatory Policy and Oversight for investigation and disciplinary review.
NASD rules require parties to cooperate in the voluntary exchange of documents and information, to exchange documents on applicable NASD Document Production Lists, and to respond to discovery requests from other parties within a certain time. NASD has become increasingly aware of instances in which parties are not complying with their duty to cooperate in the exchange of documents requested by parties or listed on applicable Document Production Lists within the specified time.
“NASD will investigate all referrals of instances in which member firms are prolonging arbitration by engaging in a protracted discovery process,” said Mary L. Schapiro, NASD Vice Chairman and President of Regulatory Policy and Oversight. “Any firm found abusing the arbitration process, including discovery, will face disciplinary action.”
One measure of the problem is the increasing frequency with which arbitration panels have imposed sanctions for discovery abuse. Last month, an NASD arbitration panel sanctioned a firm $10,000 a day for each day that the firm continued to withhold documents that the panel ordered the firm to produce. Other recent examples of discovery sanctions are listed in a Notice to Members.
The Notice to Members, which can be found at: Discovery, also lists several tools available to arbitrators for addressing discovery abuse, including issuing monetary sanctions during or at the end of an arbitration, striking claims or defenses, and making disciplinary referrals at the end of a case.
Investors can obtain more information and the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999 or through NASD’s Web site at www.nasd.com.
NASD is the leading private-sector provider of financial regulatory services, dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business - from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and member firms. For more information, please visit our Web site at www.nasd.com.