Comments on California Suit

Comments on the Perino Report and the California Court Decision

NYSE STATEMENTS RE CALIFORNIA ARBITRATION: Posted on the NYSE Arbitration WebSite are two new statements, one of which responds to the Perino Report and the Nov. 12 federal court decision in California and the other of which offers three options to California parties seeking arbitration.

Nov. 13: NYSE Statement Re Arbitration. NYSE issued a four-paragraph statement, dated November 13, 2002, which contains the Exchange’s observations about several recent developments. First, it reports approval by the SEC of enabling rules that support the resumption of arbitration in California, “provided that the parties waive the California Standards.” Second, it complements a report commissioned by the SEC and authored by Prof. Michael Perino on the sufficiency of disclosure requirements in securities arbitration. It summarizes his conclusions and adds that “[t]hese conclusions are consistent with the NYSE’s position. The NYSE will review with the SEC the analysis and minor recommendations in the report.”

Finally, the Exchange acknowledges the Nov. 12 decision of the District Court, Northern District of California. “[T]he NYSE notes that Judge Conti ruled in favor of it and the NASD on the significant issues of the Court’s jurisdiction over the suit, the SROs standing to sue, and the justiciability of the claim. Moreover, Judge Conti recognized that the NYSE and NASD may have suffered a wrong without a remedy, at least in Federal Court and at this time. The Exchange is continuing to analyze the decision and evaluate its options.”

NYSE Notice to Parties in California Arbitration. Explaining that it has been unable to appoint new arbitrators in California-based cases since July 1, 2002, due to the so-called California Standards (the Ethics Standards for Neutral Arbitrators in Contractual Arbitration, promulgated by the California Judicial Council), the Exchange advises parties of the conclusions of the November 12, 2002, Perino Report. Thus updated, “California investors and other industry participants” are urged not to delay the filing of claims in arbitration. Once filed, the claims will be processed and served “and the NYSE arbitration staff will continue to assist the parties in resolving pre-hearing matters.” Three separate courses of action may be taken to avoid the delays “resulting from the California Standard”: (1) consider mediation; (2) request an out-of-state hearing; or (3) waive the application of the California Standards. As to the latter option, “[o]nce a customer signs the waiver, it operates as a waiver for all other parties to the arbitration who are member firms or employees of member firms.” (SAC Ref. No. 02-46-02)

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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.

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.