Subject: File No. SR-NASD-2005-094
From: Steven B. Caruso, Esq.
Affiliation: Maddox Hargett & Caruso, P.C.

September 14, 2005

The purpose of this letter is to provide the Securities and Exchange Commission with comments on the above referenced proposed rule change which was filed by the National Association of Securities Dealers, Inc. on June 22, 2005

As an attorney whose practice is exclusively devoted to the representation of public investors in their disputes with the securities industry, I agree with the NASD that the accurate classification of public arbitrators in arbitration proceedings must be addressed.

Unfortunately, the proposed rule change does not sufficiently address the classifications of arbitrators between public and non-public in a manner which will promote the highest level of investor confidence in the arbitration process.

Moreover, the proposed rule change does not address the fact that the mandatory presence of a securities industry arbitrator, on every public investor claim where the amount in controversy exceeds the sum of 50,000, is an antiquated and illogical concept whose time for extinction has long ago passed.

Notwithstanding the current requirements, in my own experience, a substantial number of arbitrators, who are currently classified by the NASD as public arbitrators, have significant direct and/or indirect affiliations with the securities industry and, accordingly, should more properly be reclassified as industry arbitrators.

Perhaps the best illustration of this perceived problem is attributable to the increasing number of defense attorneys who are being assigned to serve on arbitration panels under the guise of the public arbitrator classification a phenomenon which has significantly contributed to the erosion of investor confidence in the arbitration process.

I would, accordingly, request your immediate consideration of the following proposed revisions to the applicable arbitrator classification provisions:

1. Section 10308a4C: This section should be amended so as to state that an arbitrator will be deemed as being a non-public arbitrator if he or she is an attorney, accountant, or other professional who has devoted any of his or her professional work, in the last five years, to clients who are engaged in any of the business activities listed in subparagraph 4.

It is my belief that the proposed amended language in this provision would more properly reflect the desired complete accuracy of the definition of the applicable arbitrator classification and, at the same time, would also have the following additional benefits:

a It would eliminate the continuing theoretical audit and/or enforcement responsibilities of the NASDs staff in connection with the existing twenty 20 percent or more of his or her professional work limitation for the applicable individuals;

b It would eliminate the discrepancies that naturally have occurred as a direct result of the absence of any definition for the term professional work in the current rule;

c It would, through the utilization of a five 5 year period of time, provide consistency with the other limitations in the same section of the Code including, but not limited to, Section 10308a4A; and

d Perhaps of greatest importance, it would help to all but guarantee that the objective, of insuring that public arbitrators must be free, both in fact and appearance, of ties with the securities industry, would be achieved.

2. Section 10308a5Aiv: This section should be amended so as to state that an arbitrator will not be deemed to be a public arbitrator if his or her firm has derived any revenue in the past 5 years from any person or entities listed in paragraph a4.

It is my belief that the proposed amended language in this provision would more properly reflect the desired complete accuracy of the definition of the applicable arbitrator classification and, at the same time, would also have the following additional benefits:

a It would eliminate the continuing theoretical audit and/or enforcement responsibilities of the NASDs staff in connection with the existing annual revenue limitations for the firms of the applicable individuals;

b It would eliminate the discrepancies that naturally have occurred as a direct result of the absence of any definition for the term annual revenue for the firms of the applicable individuals in the current rule;

c It would eliminate the illogical perception that an individual whose firm derives 9.99 of its annual revenue from the securities industry is somehow magically fairer than an individual whose firm derives 10.01 of its annual revenue from the securities industry; and

d Perhaps of greatest importance, it would help to all but guarantee that the objective, of insuring that public arbitrators must be free, both in fact and appearance, of ties with the securities industry, would be achieved.

3. Section 10308a5Avii: This section should be amended so as to state that an arbitrator will not be deemed to be a public arbitrator if he or she has a spouse or an immediate family member who is a person who would be deemed as being from the securities industry in accordance with subsection a4 of this rule.

It is my belief that the proposed amended language in this provision would more properly reflect the desired complete accuracy of the definition of the applicable arbitrator classification and, at the same time, would also have the following additional benefits:

a It would, through the recognition of the potential conflicts of interest that may be associated with immediate family members, provide consistency with the other similar limitations for securities industry family members in the same section of the Code; and

b Perhaps of greatest importance, it would help to all but guarantee that the objective, of insuring that public arbitrators must be free, both in fact and appearance, of close ties with the securities industry, would be achieved.

Thank you for the opportunity to provide you with my comments on the preceding proposed rule change.