NASD Dispute Resolution today announced that the U.S. Securities and Exchange Commission has approved a number of improvements to the NASD Code of Arbitration Procedure, including simplifying its language and reorganizing it in a more logical, user-friendly way.
These and other revisions codify best practices and provide more guidance to parties and arbitrators in the NASD DR forum, it said.

The new code also makes it mandatory that parties must produce (or formally object to producing) documents requested in the discovery process. In addition, the code codifies the ability of arbitrators to sanction parties for non-compliance with the discovery rules or orders of the panel. NASD DR says that these changes should significantly reduce the number of discovery disputes in NASD arbitrations. The new rules also establish uniform procedures for filing, responding to and ruling on motions in NASD arbitrations.

“NASD continues to make significant improvements to the dispute resolution forum to make the process more transparent, fair and efficient for investors and others who use the forum,” said NASD DR president Linda Fienberg.

The Mediation Code was separately approved and became effective on Jan. 30, 2006. The Customer and Industry Codes will become effective in April. The exact date will be announced in an upcoming NASD notice.

The new code refines the arbitrator selection process through creation of a new roster of public arbitrators who are qualified to serve as chairpersons in cases involving investors. Arbitrators must have a specific amount of training and experience to qualify to serve as a chairperson.

In three-arbitrator investor cases, parties will receive three lists of potential arbitrators: a public arbitrator list, a public chair-qualified arbitrator list and a non-public arbitrator list, each containing eight names. Parties can strike up to four names from each list and rank the remaining names. In single-arbitrator cases (cases involving claims of $50,000 or less), parties will choose from a list of eight public chair-qualified arbitrators. For certain industry-only cases (such as disputes between firms), NASD has also established a non-public chairperson list.

The new Customer and Industry Codes will apply to claims filed on or after April, with the exception of the list selection provisions. The arbitrator list selection rules will apply to new claims, to previously filed claims in which a list of arbitrators has not yet been generated, and in claims for which an entirely new list of arbitrators must be generated.