News Release

NASD Adoption of Mediation to Resolve Disputes Follows "Explosive" Demand for Non-Judicial Forums, Expert Says

San Francisco, CA -- To resolve disputes, Americans are turning to forums other than the courts at an "explosive" rate and the recent adoption by the securities industry of non- binding mediation is one major example, a leading authority said today.

"In recent years we have witnessed entire industries turning to arbitration and mediation as a means of resolving their disputes," said

Robert D. Raven, past president of the American Bar Association and Founding Chair of the ABA's Dispute Resolution Section. "The changes we are witnessing in our justice system are unprecedented."

Raven, senior counsel with the law firm of Morrison & Foerster, told participants at a special program on mediation at the Fall Securities Conference of the National Association of Securities Dealers, Inc. (NASD) that mediation was the leading means of resolution in cases resolved through the CPR Institute for Dispute Resolution in 1994. The non-profit organization resolved $1.5 billion in business disputes last year.

Mediation, Raven told the conference, was used in 49 percent of disputes handled by CPR, negotiation in just under 40 percent, and arbitration in less than 12 percent of cases. In light of the expanding use of mediation generally and the securities industry's rapidly expanding arbitration caseload, he said, the NASD was "wise" to begin its mediation program this year.

NASD rules governing mediation proceedings to resolve disputes between investors and securities firms or disputes between securities firms were approved by the Securities and Exchange Commission on August 1.

Raven noted that arbitration, the best-known form of alternative dispute resolution, has undergone a huge increase in demand. The American Arbitration Association reported almost 60,000 cases filed in 1994, double the caseload of 1985. The NASD, which conducts more than 85 percent of arbitrations in the securities industry, reported a record 5,570 cases filed last year.

Mediation is a non-binding negotiation facilitated by an experienced and neutral third party. It offers potential early resolution of disputes saving both time and money. If mediation is unsuccessful, the parties can still pursue arbitration or litigation. Raven said mediation is unusually flexible and adaptable to the needs of the parties.

"We are seeing a demand for new ways of resolving disputes that has created a new industry in itself," he said, noting that estimates by the Dispute Resolution Section of the American Bar Association indicated that there were 25,000 non-lawyers and 6,200 lawyers involved in alternative dispute resolution.

Under NASD mediation rules, all matters eligible for arbitration under the NASD Code of Arbitration will be eligible for mediation. The NASD has added mediation services under NASD Mediation Director Kenneth Andrichik to its nationwide dispute resolution forum. The mediation program is part of the NASD's Fall Securities Conference at the Sheraton Palace Hotel November 8 through November 10.

The NASD is the largest self-regulatory organization in the securities industry. It oversees the activities of 5,400 securities firms, more than 57,000 member branch offices, and more than 500,000 registered securities professionals. The NASD is also the primary regulator of The Nasdaq Stock Market.