HelpFINRA Manual: Contents
FINRA Manual
Corporate Organization Notices
1992
92-65 SEC Approval of Amendments Concerning the Exclusion of Class-Action Matters From Arbitration Proceedings and Requiring That Predispute Arbitration Agreements Include a Notice That Class-Action Matters May Not Be Arbitrated
92-59 SEC Approval of Amendments Requiring Prefiling of Advertisements for Collateralized Mortgage Obligations
92-58 SEC Approval of Amendment to Section 13, Schedule E to the NASD By-Laws Effective October 1, 1992
92-57 Proposed Amendments to Schedule E to the NASD By-Laws Regarding Potential Conflicts of Interest; Last Voting Date: December 21, 1992
92-56 Proposed Recision of the Guidelines Regarding Communications With the Public About Investment Companies and Variable Contracts (Guidelines) and Proposed Amendments to Article III, Section 35 of the Rules of Fair Practice to Incorporate Items From
92-51 SEC Approval of Amendments Relating to "When, as and if Issued" and "When, As and if Distributed" Contracts; Effective November 2, 1992
92-50 Procedures Regarding Securities and Exchange Commission Rule 15c2-11 and Schedule H, Section 4 of the NASD® By-Laws
92-41 SEC Approval of Amendments to Article III, Section 26 of the NASD Rules of Fair Practice Regarding Limitations on Mutual Fund Asset-Based Sales Charges; Effective July 7, 1993
92-38 SEC Adoption of Penny-Stock Disclosure Rules Under the Securities Enforcement Remedies and Penny Stock Reform Act of 1990
92-37 Proposed Amendment to Article III, Section 21 of the Rules of Fair Practice to Require Predispute Arbitration Agreements to Include a Notice That Class-Action Matters May Not Be Arbitrated; Last Voting Date: August 21, 1992
92-36 Proposed Amendment to Article III, Section 35 of the NASD's Rules of Fair Practice And Section 8 of the NASD's Government Securities Rules to Require Members to Prefile Advertisements for Collateralized Mortgage Obligations; Last Voting Date: Aug
92-32 Request for Comments on Proposed Amendment to the Rules of Fair Practice Relating to the Respective Obligations and Supervisory Responsibilities of Introducing and Clearing Firms; Last Date for Comments: July 22, 1992
92-31 SEC Approval of Amendments Relating to the Contingent Suspension of Members and Associated Persons
92-30 Proposed Amendment to Rules of Fair Practice to Require Members to Send Periodic Statements of Account to Customers; Last Voting Date: July 22, 1992
92-28 SEC Approval of Corporate Financing Rule and Code of Procedure for Corporate Financing and Direct Participation Program Matters
92-25 Proposed Amendment to Article III, Section 15 of the NASD Rules of Fair Practice Re: Exemption for Negative-Response Letters Used to Facilitate Certain Bulk Exchanges of Money Market Mutual Funds
92-20 Sale of Direct Participation Program Debt Instruments by Limited Principals and Representatives; SEC Approval of Amendments to Parts II and III of Schedule C To the NASD's By-Laws
92-19 Retention of Jurisdiction; SEC Approval of Amendments to Article III, Section 5 and Article IV, Sections 3 and 4 of the Association's By-Laws, and Article IV, Section V Of the Association's Rules of Fair Practice
92-18 SEC Approval of Amendments to the Definition of the Term "Branch Office" in Article III, Section 27 of the Rules of Fair Practice
92-17 Adoption of Amendments to Interpretation of the Board of Governors — Forwarding Of Proxy and Other Materials, Article III, Section 1 of the NASD Rules of Fair Practice Re: Forwarding Proxy Material on the Request of Stockholders
92-10 Approval of Amendments to Article III, Section 3 of the NASD By-Laws Regarding NASD Member Requirement to Appoint One Executive Representative Responsible For Voting and Acting for the Member in All Affairs Relating to the NASD
92-8 Proposed Amendment to Rules of Fair Practice, Article III, New Section 46: Short-Sale Rule for Nasdaq/NMS Securities and New Section 47: Primary Nasdaq Market Makers; Last Voting Date: March 13, 1992
92-4 Revision to the Investment Company Products/Variable Contracts Limited Principal Examination (Series 26)
| View Whole Section | Text only | Print Manager | Link |
 | NASD Rules (1 link) |  |
92-65 SEC Approval of Amendments Concerning the Exclusion of Class-Action Matters From Arbitration Proceedings and Requiring That Predispute Arbitration Agreements Include a Notice That Class-Action Matters May Not Be Arbitrated
| SUGGESTED ROUTING:* |
Senior Management |
EXECUTIVE SUMMARY
On October 28, 1992, the Securities and Exchange Commission (SEC) approved amendments to Section 12 of the NASD Code of Arbitration Procedure and Article III, Section 21 of the NASD Rules of Fair Practice. The amendments to Section 12 took effect on October 28, 1992, but the change to Article III, Section 21 will not take effect until October 28, 1993, one year after Commission approval. The text of the amendments follows the discussion below.
BACKGROUND AND DESCRIPTION OF AMENDMENTS
On October 28, 1992, the SEC approved amendments to Section 12 of the NASD Code of Arbitration Procedure (Code) and Article III, Section 21 of the NASD Rules of Fair Practice to exclude class-action matters from arbitration proceedings conducted by the NASD and to require that predispute arbitration agreements contain a notice that class-action matters may not be arbitrated.
The Securities Industry Conference on Arbitration (SICA) developed the rule change in response to the SEC's directive, articulated by former SEC Chairman David Ruder, that investors have access to the courts in appropriate cases. SICA determined to clarify the treatment of class actions in its rules and, since 1990, has been developing such rules for the Uniform Code of Arbitration. On January 7, 1992, SICA unanimously adopted a final version of its rule language, which has been modified to conform to the NASD's Code provisions.
The amendment to Section 12 of the Code adds a new subsection (d). Under subsection (d)(1) claims filed in arbitration as class actions are not eligible for submission under the Code. Subsection (d)(2) provides that claims filed by members of a putative or certified class action (class action) filed in another forum are ineligible for submission if the claim is part of the class action. A panel of one or three arbitrators or the court with jurisdiction over the class action will settle disputes over whether the claim is part of a class action.
Under subsection (d)(3) no member or associated person can compel arbitration against a customer who is a member of a class action unless class certification is denied, the class is decertified, the customer is excluded from the class, the customer either elects not to participate in the class action, or the customer has complied with court-imposed conditions for withdrawing from the class.
Accordingly, neither members nor their associated persons may use an existing arbitration agreement to compel a customer to arbitrate a claim included in a class action. Subsection (d)(4) provides that members and associated persons do not waive their rights under the Code or any agreement to arbitrate, except to the extent stated in Subsection (d).
The rule change also amends Article III, Section 21(f) of the NASD Rules of Fair Practice, which governs the content of predispute arbitration agreements with customers, to make it consistent with Subsection 12(d) of the Code. All new agreements signed by customers must contain a statement prohibiting persons from bringing class actions to arbitration and from attempting to enforce an agreement to arbitrate against a member of a class action. To provide NASD members sufficient time to redraft and reprint their arbitration agreements, the amendment to Section 21(f) will take effect October 28, 1993.
Questions regarding this Notice may be directed to Deborah Masucci, Vice President, Arbitration, at (212) 480-4881.
PART III OF THE CODE OF ARBITRATION PROCEDURE
Required Submission
Sec. 12.
* * * * *
TEXT OF AMENDMENTS TO ARTICLE III OF THE RULES OF FAIR PRACTICE
Books and Records
Sec. 21.
Requirements When Using Predispute Arbitration Agreements with Customers
* * * * *
