Dispute Resolution Continued Criticism

NASD-DR Continues to react to criticism of its expertise ranking system

NASD-DR continues to react to criticism of its expertise rankings for arbitrators by directing its arbitrators to explain the basis for any claims to expertise.

The Neutral List Selection System was designed to operate on a rotational basis, so that conceptually all arbitrators serving a particular hearing location will have an equal chance of being nominated for service over time. Qualifying that “ideal” are the differences that exist among people who are arbitrators, such as readily apparent conflicts and, when it is requested by a party, expertise in a particular area (presumably one involved in the specific dispute).

At significant cost, (See “Ernst & Young Reports No NLSS Bias,” SAA 01-43), NASD Dispute Resolution has effectively debunked charges that the expertise function was favoring long-serving arbitrators, but evidently a residual issue from that PIABA-NASD debate (see SAA 00-31; 11 SAC 8(1)) concerns the ease with which arbitrators can lay claim to various sectors of expertise.

Questioning those selections arbitrators have made in past questionnaires, NASD-DR recently sent arbitrators a new questionnaire, but asked this time that the neutrals lay a foundation for claiming expertise in each one of the areas enumerated in the questionnaire form.

Sample explanations were given as guidance, so that arbitrators who want to designate an expertise can specify the experience in their past that qualifies them in the designated area.

An arbitrator who does not respond to the questionnaire with the required explanations for each expertise sector will have previously claimed areas of expertise stricken from his/her arbitrator profile.

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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 - SECLaw.com, 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.