Thursday, January 27, 2005
Nancy Condon (202) 728-8379
Sarah Bohn (202) 728-8988
New Arbitration Rule Requires Award Explanations Upon Investor Request
Washington, D.C.— NASD announced today that the NASD Board of Governors approved an amendment to the Code of Arbitration Procedure allowing customers arbitrating disputes with brokers or brokerage firms to require a written explanation of the arbitration panel’s decision. Registered representatives arbitrating industry disputes may also require written explanations of decisions. Currently, issuing an explained decision is solely within the discretion of an arbitration panel.
This amendment will be filed with the Securities and Exchange Commission and is subject to its approval.
“We have found that investors want to know more about how a panel reaches its decision,” said NASD Chairman and Chief Executive Officer Robert R. Glauber. “By giving investors the option of requiring a written explanation of an arbitration panel’s decision, we will increase investor confidence in the fairness of the NASD arbitration process.”
The proposed rule will require customers to request a written explanation before the arbitration panel holds its first hearing. At the conclusion of the process, the panel will provide a written award describing why each claim was granted or denied. Unlike court decisions, explained awards need not cite cases or statutes. Arbitrators will receive $200 each for an explained decision, with NASD paying half to defray the cost to the parties.
NASD Dispute Resolution is the largest securities dispute resolution forum in the world. NASD facilitates the efficient resolution of monetary, business, and employment disputes between investors, securities firms, and employees of securities firms by offering both arbitration and mediation services through a network of hearing locations across the United States.
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.