NASD Streamlines Arbitration Process for Claimants Filing Against Defaulting Suspended or Terminated Industry Respondents
Michael Shokouhi 202-728-8304
Washington, D.C. — NASD announced that the Securities and Exchange Commission (SEC) has approved streamlined default procedures for use when a terminated or defunct member or associated person does not answer an arbitration claim. The procedures are designed to make it easier, faster, and less expensive for investors to obtain an award against a defunct firm or broker that can then be enforced in court. The new procedures become effective on Oct. 14, 2002.
Current NASD rules allow investors with claims against defunct brokerage firms to take their claims to court if they prefer, regardless of any arbitration agreement they might have signed. A year ago, NASD began notifying investor claimants if the member firm was defunct, so investors could make an informed decision regarding whether to proceed in arbitration, to file their claim in court, or to take no action. Investors with claims against terminated or defunct members will now have the additional choice of proceeding under the streamlined default procedures.
"The collective purpose of these changes is to put the investor in a position to quickly collect against a terminated member. We now have in place a more effective means for investors to have their cases against terminated or defunct members heard quickly and, if there is an arbitration award, to proceed to court to collect from the firm or broker," said Linda D. Fienberg, President of NASD Dispute Resolution. "These procedures will provide investors with more options and a streamlined and expeditious process in which to take action in collecting awards."
Under the new rule, if an investor or other claimant opts to use default procedures, the case will proceed with a single arbitrator. The arbitrator in the default case will make a decision based upon the Statement of Claim and any other material submitted by the claimant. In keeping with the streamlined nature of the procedures, no hearing will be conducted.
Detailed information on these procedures is available at http://www.nasdr.com/pdf-text/0258ntm.pdf.
NASD is the leading private-sector provider of financial regulatory services, dedicated to bringing integrity to the markets and confidence to investors 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.