From: Michael J. Willner
To the SEC
Please accept this submission as my comment on the NASD's proposed Code Revision.
I am a partner in the law firm of Miller, Faucher and Cafferty LLP representing public investors in NASD and NYSE arbitrations. I have represented investors in SRO arbitrations since the mid 1990's primarily in the Philadelphia and Chicago venues, but also in Florida, Utah, New York, D.C. and Connecticut. I have a depth of experience in the arbitration of commercial disputes in a variety of arbitral fora, including more than 50 arbitrations in a variety of AAA, state, federal and non-SRO contractual arbitrations. In my opinion, SRO arbitration and NASD arbitration has many troubling flaws.
Kindly note that I endorse the observations set forth in the comment letter of PIABA. In addition, please consider the following observations.
I am concerned about the chair-qualified panel. The NASD refers to payment to arbitrator as an "honorarium," and expressly assures public nvestors that arbitrators are not NASD employees. In fact, there already are too many "career" arbitrators that do so much arbitration work that they are de-facto NASD employees. Rule revisions that further encourage career arbitrators is not fair to public investors. In my opinion, there is a grave risk that career arbitrators perceive their own financial interest in avoiding issuance of arbitration awards that member firms will view as unfavorable. There is no commensurate concern amongst these arbitrators regarding individual investors who are not repeat players.
Career arbitrators and automatic inclusion of an industry or "non-public arbitrator" should be eliminated entirely. It is stacking the deck plain and simple and the rationales that have been offered have been pre-textual. The fair way to assure arbitrator competence and fairness in SRO arbitration is to remove the SRO from the selection and disqualification process entirely. Allow each party to select an arbitrator and the selected arbitrators should then select a third. The default for the selection of a third arbitrator should not be the NASD, but court appointments. Against that backdrop the party-selected arbitrators will agree on skilled and neutral arbitrators in a market system.
The NASD should have no role in selecting, training or disqualifying arbitrators in my opinion. It has an inherent conflict.
The revisions on motions to dismiss is an improvement because it expressly discourages such motions except in extraordinary cases. The use of this motion tactic by firms has been abusive and relies on a misnomer. The motions filed are almost always summary judgment motions and not mere motions to dismiss that accept or adopt the factual premises underlying the statement of claim. In my expereince, these motions often have been filed in circumstances where public customers have had no discovery and do not have a fair chance (witout a hearing) to demonstrate a factual dispute. Intead of a bona fide challenge to the legal sufficiency of the claims, firms use these motions to argue their disputed version of the facts and deny customers reasonable due process.
Thank you for this opportunity to comment.
Michael J. Willner
Miller Faucher and Cafferty LLP