Arbitration and Mediation
Although most business in the securities industry is completed without a problem, disputes and controversies occasionally arise. To assist in the resolution of monetary and business disputes between investors and their securities firms (as well as between member firms), NASD Regulation operates the largest arbitration forum in the securities industry and now features a full-scope mediation program.
Arbitration is not an extension of NASD Regulation's disciplinary procedures, which result in sanctions being imposed for violations of rules. Rather, arbitration is a dispute resolution mechanism designed to help aggrieved parties recover damages.
The principal benefit of arbitration is that it provides a prompt, inexpensive alternative to litigation in the courts. The rules are based on a Uniform Code of Arbitration developed by the Securities Industry Conference on Arbitration. Arbitration is final and binding, subject to review by a court only on a very limited basis.
In an arbitration proceeding, impartial persons knowledgeable in the areas of controversy hold a hearing, listen to oral arguments, review evidence submitted, and render a decision. For small claims (less than $10,000), the customer can opt to forego a hearing and have the case based on the submissions presented.
The goal of mediation is to provide public customers, member firms, and associated persons with another effective way to resolve their disputes. Mediation is a voluntary settlement conference that is facilitated by a third party neutral. The resulting settlement is likely to save the parties substantial time and expense.
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