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05-85 SEC Approves a Proposed Rule Change to Revise the Mediation Rules of the NASD Code of Arbitration Procedure; Effective January 30, 2006
NASD Code of Arbitration Procedure Mediation Rules
|Legal and Compliance||Code of Arbitration Procedure
The Securities and Exchange Commission (SEC) has approved a proposed rule change to revise the mediation rules of the NASD Code of Arbitration Procedure (Code) to simplify the language and to reorganize these rules into a separate code for mediations (Mediation Code).1
The text of the amendment is set forth in Attachment A. The amendment will become effective on January 30, 2006 and will apply to any matters filed in mediation with NASD on or after January 30, 2006.
Questions regarding this Notice may be directed to Mignon McLemore, Assistant Chief Counsel, NASD Dispute Resolution, at (202) 728-8151 or email@example.com; or Kenneth Andrichik, Senior Vice President and Director of Mediation and Business Strategies, Dispute Resolution, NASD, at (212) 858-3915 or firstname.lastname@example.org.
Background and Discussion
The revision of the mediation rules is part of a comprehensive plan to reorganize and simplify the Code. NASD has proposed to reorganize its dispute resolution rules in a more logical, user-friendly way, including creating two separate Codes for customer and industry arbitrations,2 and one for mediations. The proposed rule change establishes a separate Mediation Code by rewriting the mediation rules using plain English, in accordance with the SEC's plain English guidelines.3
NASD did not make any substantive changes to its current rules governing mediations in the proposed rule change. The Mediation Code does, however, contain a new comprehensive definitions rule, which includes definitions of terms used throughout the Mediation Code. NASD believes that this addition to the Mediation Code will provide useful clarification for parties and mediators. There are no substantive changes to the Mediation Code, and the procedures for filing a matter in mediation remain unchanged.
Effective Date Provisions
The amendment described in this Notice will become effective on January 30, 2006. The amendment will apply to any matters filed in mediation with NASD on or after January 30, 2006.
1 Exchange Act Release No. 52705 (Oct. 31, 2005) (File No. SR-NASD-2004-013), 70 Federal Register 67525 (Nov. 7, 2005).
2 NASD has filed two proposed rule changes with the SEC to revise the Customer and Industry Portions of the Code. See Securities Exchange Act Rel. No. 34-51856 (June 15, 2005); 70 Fed. Reg. 36442 (June 23, 2005) (Customer Code) and Securities Exchange Act Rel. No. 34-51857 (June 15, 2005); 70 Fed. Reg. 36430 (June 23, 2005) (Industry Code).
3 NASD intends to renumber the rules in the Mediation Code to be consistent with the Customer Code and Industry Code when they are approved and become effective.
New language is underlined; deletions in brackets.
Code of Arbitration Procedure
[10400–10407 Mediation Rules]—(Deleted in their entirety.)
10400. NASD CODE OF MEDIATION PROCEDURE
Unless otherwise defined in the Code, terms used in the Code and interpretive material, if defined in the NASD By-Laws, shall have the meaning as defined in the NASD By-Laws.
The term "Board" means the Board of Directors of NASD Dispute Resolution, Inc.
The term "Code" means the NASD Code of Mediation Procedure.
The term "Director" in the Rule 10400 Series refers to the Director of Mediation at NASD Dispute Resolution. Unless the Code or any other NASD rule provides otherwise, the term includes NASD staff to whom the Director of Mediation has delegated authority.
The term "matter" means a dispute, claim, or controversy.
The term "NAMC" means the National Arbitration and Mediation Committee of the Board of Directors of NASD Dispute Resolution, Inc.
Unless the Code specifies otherwise, the term "NASD" includes NASD, Inc., and NASD Dispute Resolution, Inc.
The term "Submission Agreement" means the NASD Mediation Submission Agreement. The NASD Mediation Submission Agreement is a document that parties must sign at the outset of a mediation in which they agree to submit to mediation under the Code.
10402. Applicability of Code
The Code applies to any matter submitted to mediation at NASD.
10403. National Arbitration and Mediation Committee
10404. Director of Mediation
The Board shall appoint a Director of Mediation to administer mediations under the Code. The Director will consult with the NAMC on the administration of mediations, as necessary.
The Director may delegate his or her duties when appropriate, unless the Code provides otherwise.
10405. Mediation Under the Code
10406. Effect of Mediation on Arbitration Proceedings
10407. Mediator Selection
- By the parties from a list supplied by the Director;
- By the parties from a list or other source of their own choosing; or
- By the Director if the parties do not select a mediator after submitting a matter to mediation.
10408. Limitation on Liability
NASD, its employees, and any mediator named to mediate a matter under the Code shall not be liable for any act or omission in connection with a mediation administered under the Code.
10409. Mediation Ground Rules
10410. Mediation Fees
Each party to a matter submitted directly to a mediation administered under the Code must pay an administrative fee to NASD in the amounts indicated in the schedule below, unless such fee is specifically waived by the Director.
Amount in Controversy Customer and Associated
Member Fee $.01–$25,000 $ 50 $150 $25,000.01–$100,000 $150 $300 Over $100,000 $300 $500
When a matter is initially filed in arbitration and subsequently submitted to mediation under the Code, each party must pay an administrative fee to NASD in the amounts indicated in the schedule below, unless such fee is specifically waived by the Director.
Amount in Controversy Customer and Associated
Member Fee $.01–$25,000 $ 0 $ 0 $25,000.01–$100,000 $100 $150 Over $100,000 $250 $500
The parties to a mediation administered under the Code must pay all of the mediator's charges, including the mediator's travel and other expenses. The charges shall be specified in the Submission Agreement and shall be apportioned equally among the parties unless they agree otherwise. Each party shall deposit with NASD its proportional share of the anticipated mediator charges and expenses, as determined by the Director, prior to the first mediation session.