NASD Proposes Eliminating Mandatory Arbitration of Employment Discrimination Claims for Registered Brokers
Nancy A. Condon - (202) 728-8379
Washington, D.C.-- The National Association of Securities Dealers, Inc. (NASDâ), today announced it would eliminate mandatory arbitration of statutory discrimination claims for registered brokers.
Currently, the NASD requires all registered representatives and principals, as a condition of employment in the securities industry, to agree to arbitrate all employment and investor claims.
The new NASD policy would permit employees to choose between entering into private arbitration agreements with their employers, or reserving the right to file a case in federal or state court for statutory discrimination claims. The NASD’s proposed new rule also would require any brokerage firm which uses private arbitration agreements with its employees to specify an arbitration forum that meets standards similar to those articulated in the American Bar Association’s "Due Process Protocol."
The effective date for this rule change will be one year from Securities and Exchange Commission (SEC) approval. The new rule will not affect brokers’ responsibility to submit to arbitration claims brought by investors.
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. Finally, this proposal will require enhanced disclosure to employees.
"We continue to believe that arbitration is more efficient, less expensive, and has served employees and brokerage firms well in resolving disputes in the overwhelming number of cases. However, for cases that allege a violation of a person’s civil rights, employees will have the choice to have their claim heard in court. At the same time, we are absolutely committed to strengthening NASD’s arbitration system so that it will continue to be the forum of choice for all employer-employee disputes. We wish to thank everyone who participated in helping us to reach this decision," said Frank G. Zarb, Chairman, Chief Executive Officer, and President of NASD.
Of the 5,631 cases filed in the NASD’s arbitration forum last year, 109 alleged employment discrimination of some kind. The Form U-4 (a uniform document developed by the NASD in conjunction with state regulators and other self-regulatory organizations), which contains the binding arbitration clause, does not have to be rewritten to accommodate the new rule.
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 the investor.