Arbitrator Disclosure Report Released

SEC Commissioned Independent Study Recommends Against Use of California Disclosure Rules

PERINO REPORT RELEASED BY SEC: The November 13, 2002 SEC News Digest summarizes the findings and recommendations of a study on arbitrator disclosures sparked by the California Judicial Council controversy.

The Report by Professor Michael Perino, an associate professor of the St. John’s University School of Law (and currently a visiting professor at Columbia Law School), was commissioned by the SEC “to assess whether the current disclosure requirements in NASD and NYSE arbitration procedures should be modified to reflect any of the disclosure concepts in California’s recently adopted arbitration rules.”

In the Report, Prof. Perino recommends against incorporating the California arbitration rules into the current SRO Codes. On the upside, little benefit would accrue to investors and, on the downside, there could be increased costs and “significant unintended consequences that may reduce investors’ perceptions of the fairness of SRO arbitrations.

Despite a finding that “the current SRO conflict disclosure requirements generally appear adequate,” there are “enhancements” that might be made, the Professor writes. “For this reason,” the Digest indicates, “his report recommends that the SROs: (1) amend their arbitration rules to emphasize that all conflict disclosures are mandatory; (2) re-examine the current definitions of public and non-public arbitrators; (3) provide greater transparency with respect to challenges for cause by including the cause standard in their rules; and (4) sponsor independent research to evaluate the fairness of SRO arbitrations.” (SAC Ed: As the Report just issued, we relied on the News Digest summary here. The full Report has been posted by the SEC in the Market Regulation section of the agency’s WebSite, (SAC Ref. No. 02-45-02)

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Securities Attorney at Sallah Astarita & Cox | 212-509-6544 | | Website | + posts

Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page -, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.