August 14, 2007
Nancy M. Morris, Secretary
U.S. Securities and Exchange Commission 100 F Street NE Washington,
D.C. 20549-9303
Re: SR-NASD-2007-021: Proposed Amendment to Rule 12100(u) of the NASD Code of Arbitration Procedure, Which Pertains to Definition of Public Arbitrator
Dear Ms. Morris:
We write to urge the SEC to have a "public" arbitrator actually be someone who represents the background of the public at large, not another "industry" securities arbitrator. An adjudicatory system relies upon a sense of some fairness; having "public" arbitrators who have worked for Wall Street firms either as brokers or lawyers is a taint of the ordinary expectations of a public arbitrator. A person who receives anything--any amount of money or other compensation or benefit-- from a broker dealer should not be fitted into the public category. For the SEC to convey that it is overseeing a fair forum, the SEC must fight to have the public arbitrator truly be a public representative, not another industry arbitrator.
As an attorney, I have represented consumers in numerous proceedings, before arbitration forums of various creation, and State and Federal Courts throughout the Nation. No matter the location or the forum, my client’s first question is whether she will get a fair hearing. In arbitration, where there are no rules of evidence, no judicial oversight, and no statutes to closely follow, a sense of fairness in the arbitrators is even more important. There is no sense of fairness in defining a public arbitrator as someone who is only a "little" bit beholden to the industry. There is no sense of fairness in anything other than a brightline rule of no industry payments at anytime. A brightline rule is especially important because there is no opportunity for Claimant’s counsel to investigate, on the record, the arbitrator’s earnings and relationships. Such an investigation could easily predispose an arbitrator against a claimant when we were only trying to have a fair forum.
An arbitrator should confirm that she has not received any money, compensation, or other benefit, from a broker dealer within the last ten years, nor has any partner or associate of the arbitrator. The public cannot fully believe in the fairness of the forum when the public arbitrator, not just the industry arbitrator, but the public arbitrator earns a substantial living from the financial firms. Arbitrators who have financial or other relationships with broker dealers can always serve as industry arbitrators.
This matter of fairness, and the perception of fairness, is an important area for the SEC to address, especially with the lack of competition in the securities arbitration forums caused by the recent merger of the NASD and NYSE. Thank you for providing a full discussion of this important proposed rule change.
Very truly yours,
/s/
Joseph S. Fogel
Joseph Fogel
Fogel & Associates