NASD Workshop - Insights Into The Changes To The NASD Code Of Arbitration Procedure

Profession:Sutherland Asbill & Brennan

On March 1, 2007, NASD Dispute Resolution President Linda Fienberg, along with NASD Vice President and Director Richard Berry, presented an arbitrator workshop on the recently approved revisions to the NASD Code of Arbitration Procedure. The changes will affect selection of arbitrators, motions practice, imposition of sanctions, postponement of hearings, 20 day exchange, and many other critical aspects of a case. The most significant changes are summarized below in a Q & A format.

Q1: When will the changes become effective?

A: The changes to the NASD Code of Arbitration Procedure (the "Code") will become effective on April 16, 2007 and will apply to all cases filed on or after the effective date. The only exception to the effective date is that the new rules governing the arbitrator selection process will apply to all cases in which a list of arbitrators has not yet been generated or in which an entirely new list of arbitrators must be generated. In addition, in pending cases filed before April 16, 2007, the parties may agree, through written stipulation, to have the new rules in their entirety govern their case.

Q2: How do the new rules change the arbitrator selection process for customer claims?

A: If a panel consists of three arbitrators, the Neutral List Selection System will generate three lists, each containing the names of eight potential arbitrators. As under the current system, public and non-public arbitrators will be identified on separate lists. The third list will be comprised of public arbitrators who are qualified to serve as the chairperson of a panel. In addition, the parties can stipulate that the chairperson list contain only arbitrators who are attorneys. Where the panel consists of only one arbitrator, the Neutral List Selection System will continue to generate a single list of eight public arbitrators. Each separately represented party may strike up to four arbitrators from each list for any reason. See Rule 12404.

Q3: How do the rule changes affect the selection of the chairperson of the panel?

A: New Rule 12400 provides that the chairperson of each panel must be selected from the list of chairperson-qualified arbitrators. To be chairperson-qualified, arbitrators must be either: (1) an attorney who has sat through two arbitration cases through the award date; or (2) a non attorney who has sat through at least three such cases. They also must complete an NASD training program or have "substantially equivalent" training...

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