NASD Rule Change on Replacement Arbitrators

 NASD Rule Change on REplacement Arbitrators 

Vacancies to be filled immediately, without a request from the parties.


Under a Rule proposal filed with the SEC last week, vacancies on Panels will be filled right away, without waiting for the parties to request a replacement Arbitrator.

Rule 10313 provides for the replacement of arbitrators on active Panels, but only if no party objects to continuing with just the remaining arbitrators. Absent an objection within 5 days after notification of an Arbitrator becoming disqualified, resigning, dying, or refusing or being otherwise unable to serve, no replacement arbitrator will be appointed and the one or two arbitrators that remain on the Panel will move forward with the case.

The staff indicates in a Rule filing with the Securities and Exchange Commission (SR-NASD-2002-38) made on March 22, 2002, that objection to continuing with the remaining arbitrators almost always comes from one or another party. “[P]arties almost never want to proceed with only the two remaining arbitrators.”

Under the new proposal, the default procedure will be reversed. A replacement arbitrator will be appointed by the Director at the time of notification and parties will now have 5 business days after notification of a vacancy to agree to proceed with just the remaining arbitrators. If they do not, the replacement arbitrator will be seated.

Thus, under the new proposal, the remaining arbitrators will continue with the hearing and determination of the controversy, only if there is mutual consent.

Under the existing procedures, a replacement arbitrator would be named only after the 5-day waiting period. Under the new procedures, a replacement would be named “immediately, without waiting for an objection,” thus saving time and administrative expense, NASD-DR states.

Because NASD-DR considers this departure from the Uniform Code of Arbitration non-controversial, it has submitted the proposal with a request for immediate effectiveness and proposes to make the proposed rule change operative on April 22, 2002. (SAC Ed: Under this procedure, parties will be in a position to know who the replacement arbitrator will actually be, where, under the existing procedures, the parties rolled the dice when they asked for a replacement arbitrator. After April 22, if neither party likes the replacement, they can agree to proceed with just the remaining arbitrators.) (SAC Ref. No. 02-13-02)


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Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article. 


Mark J. Astarita is a veteran securities attorney representing investors and financial professionals nationwide in securities investigations and arbitrations. Have a question? Email him at, call his office at 212-509-6544, or visit The Securities Lawyer

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.