Investors Question NASD Arbitration Process
Investor's Business Daily (08/01/00) Vol. 22, No. 49 p.B3; Hoover, Ken
Attorneys hired to represent investors in arbitration
disputes claim the computer operated by the National Association
of Securities Dealers (NASD) is programmed to favor brokerages.
Lawyers say their suspicions were raised after viewing a
demonstration of the computer that helps select arbiters. The
system is supposed to randomly select names from a pool of
prospective mediators, and once an arbitrator has been used,
place his/her name at the bottom of the list. But attorneys
claim that did not occur during the demonstration. Witnesses
purport that some of the names were appearing more than once.
Lawyers remember noticing other irregularities as well. For
example, Mark Maddox with the Public Investors Arbitration Bar
Association said the NASD computer technician informed lawyers
that the computer would not provide the names of experts if
asked, but would rather offer names by seniority. Given that the
most experienced panelists tend to lean toward the industry in
arbitration cases, investors' lawyers have concluded the system
is rigged against their clients.