NASD Panel Revises Arbitration Rules

Journal of Accountancy, April 1996 | Go to article overview

NASD Panel Revises Arbitration Rules


A report commissioned by the National Association of Securities Dealers has recommended as many as 70 ways to make securities arbitration less litigious. Many participants in the arbitration process have expressed concern that the litigious nature of securities arbitration undermines its advantages--cost and time efficiency. The report, Securities Arbitration Reform, produced by the Arbitration Policy Task Force, must be approved by both the NASD board of directors and the Securities and Exchange Commission before any rule changes can go into effect.

"CPAs who register as investment advisers, hold securities licenses or are offering investment implementation should receive these rules very favorably," said Stephen A. Batman, CPA and chairman and chief executive officer of 1st Global Partners, a Dallas investment and financial planning services company. "These rules put a cap on punitive damages, define clear processes for arbitration discovery and improve the quality of arbitration panel members."

The task force--commonly known as the Ruder commission after its chairman, David S. Ruder--has urged all self-regulatory organizations that offer arbitration forums to apply its recommendations. Some of the most significant changes include

* Limiting the cap on punitive damages to the lesser of double the compensatory damages or $750,000.

* Expanding the ceiling for simplified arbitration procedures from $10,000 to $30,000. …

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